What is the purpose of the Extended Term Option?

The Extended Term Option is designed to allow a policyholder to convert their permanent life insurance policy into a term insurance policy with a death benefit equal to the original policy's face value. This option typically becomes available when a policyholder decides to stop paying premiums or cancels their policy.

Under this provision, the cash value accumulated in the permanent policy is used to purchase term insurance for a specified period. This means that while the structure of the insurance changes from permanent to term, the death benefit remains the same as that of the original policy. It provides a way for the policyholder to retain a level of coverage without the need for ongoing premium payments, leveraging the policy's cash value effectively.

This is particularly beneficial for those who may not need permanent insurance anymore but still want to ensure that their beneficiaries are protected for a certain term. Thus, the Extended Term Option offers flexibility and continued coverage while facing changes in financial circumstances or insurance needs.