Maryland Life and Health Insurance License Practice Exam

The extended term option in a whole life policy serves as a nonforfeiture provision, allowing policyholders to convert their policy's cash value into a term insurance policy for a specified period. When a whole life policy lapses or premiums are no longer paid, instead of forfeiting the cash value, the policyholder can choose to use this accumulated cash value to purchase term insurance. This feature provides valuable protection to the insured, ensuring that some level of life insurance coverage is maintained without having to continue premium payments for the whole life policy.

This option effectively maximizes the benefits of the cash value that has been built up in the whole life policy, providing a temporary solution to maintain coverage rather than losing it entirely. Other options do not represent this function; for instance, increasing premiums or modifying the policy would not maintain the coverage provided by the cash value, and adding riders does not align with the conversion of cash value to term insurance.