Question 15
Which situation accurately describes a reduced paid-up nonforfeiture option?
Policy has a decreased face amount
Face amount of the new policy equals that of the original policy
Cash value is surrendered to policyowner
Premiums must continue to be paid
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Answer :

Final answer:

The reduced paid-up nonforfeiture option allows policyholders to convert their policy into a paid-up policy with a reduced face amount without the need to pay additional premiums.


Explanation:

Reduced Paid-Up Nonforfeiture Option: This option allows the policyholder to stop paying premiums and convert the policy into a paid-up policy with a reduced face amount.

Example: If a policyholder decides to trigger the reduced paid-up nonforfeiture option on a [tex]$100,000 policy, the new paid-up policy might have a reduced face amount of $[/tex]50,000.

Outcome: The cash value of the original policy is used to fund the new reduced paid-up policy, and no further premiums are required to be paid.


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