What is Extended Term Insurance?
Extended Term Insurance is a feature in many permanent life insurance policies, such as Whole Life, that enables the policyholder to continue coverage without paying additional premiums. If the policyholder chooses this option, the cash value accumulated in the policy is used to purchase a term insurance policy with the same death benefit as the original policy. This term coverage continues until the cash value is depleted, at which point the coverage ends.
This option is beneficial for those who want to maintain their death benefit but can no longer afford the premiums of the original policy. For example, if a policyholder can no longer keep up with premium payments on a Whole Life policy, they might choose Extended Term Insurance to keep the same level of coverage for a limited period without additional costs.
Extended Term Insurance is considered a non-forfeiture option because it allows policyholders to retain some level of protection instead of surrendering the policy entirely. However, it’s important to note that the coverage is temporary and will eventually expire when the cash value used to fund it runs out.