A whole life policyowner has accumulated $40,000 in cash value and stops paying premiums without surrendering the policy or contacting the insurer. The policy's automatic non-forfeiture provision defaults to Extended Term insurance. Which statement correctly describes the Extended Term outcome?

Why this is the answer

Extended Term insurance is one of three standard non-forfeiture options. The cash value ($40,000) is applied as a net single premium to purchase term insurance at the full original face amount (not a reduced amount). The policy converts to a paid-up term policy; no further premiums are owed. Coverage lasts for however many years and days the single premium will support at the insured's attained age. A smaller paid-up whole life policy is Reduced Paid-Up insurance, and a lump-sum payment is the Cash Surrender Value option, which requires the policyowner to actively surrender the policy. No nonforfeiture option keeps a policy in force indefinitely with no death benefit. The TX outline §II.B and TIC §1105.004 require non-forfeiture provisions in all individual whole life policies.