Washington Life Producer Practice Exam

Which option is NOT a common nonforfeiture option in life insurance?

1. Cash surrender value

2. Extended term insurance

3. Life income annuity

4. Reduced paid-up insurance

The correct answer is: Life income annuity

In the context of life insurance, nonforfeiture options are provisions that allow policyholders to retain some value or benefit from their life insurance policy if they stop paying premiums. Common nonforfeiture options include cash surrender value, extended term insurance, and reduced paid-up insurance. Each of these options allows policyholders to access benefits or coverage even after they have ceased premium payments. A life income annuity, on the other hand, is not classified as a nonforfeiture option. This option refers to a financial product that provides regular income payments to an individual for a specified period or for the rest of their life, typically following the conversion of a lump sum into an annuity. It is more related to retirement planning rather than a provision associated with life insurance policy nonforfeiture options. Therefore, while cash surrender value, extended term insurance, and reduced paid-up insurance are designed to protect policyholders from loss, a life income annuity does not fit into this category.