South Carolina Insurance Practice Exam

Which of these is NOT considered a nonforfeiture option in a whole life insurance policy?

1. Interest only

2. Cash surrender value

3. Paid-up insurance

4. Extended term insurance

The correct answer is: Interest only

In whole life insurance policies, nonforfeiture options are benefits that policyholders can access if they decide to stop paying premiums. These options allow policyholders to receive some value from their policy instead of completely losing it. The correct response indicates that "Interest only" is not a nonforfeiture option. Instead, this term generally refers to a method of receiving policy dividends or death benefits rather than an option to retain value in the policy itself. In contrast, cash surrender value allows policyholders to withdraw the accumulated cash value of the policy if they choose to terminate it. Paid-up insurance enables policyholders to convert the policy into a smaller, fully paid-up policy without requiring further premium payments. Extended term insurance allows policyholders to use the cash value to purchase term insurance for a specified period instead of a permanent policy. Each of these options preserves some value from the policy, while "Interest only" does not fit this category.