What is an Extended Term option in a life insurance policy?

The Extended Term option in a life insurance policy refers specifically to the ability of a policyholder to use the cash value accumulated in their whole life policy to purchase a term insurance policy with a death benefit equal to the original policy. This option allows the policyholder to maintain life insurance protection for a specified period without needing to pay premiums, instead leveraging the cash value they have built up.

By selecting this option, the policyholder effectively converts their existing policy's cash value into a single premium payment for a term policy. This can provide continued coverage for the beneficiaries for a set number of years. As a result, this route ensures that the insured maintains some level of life insurance protection, even if they are no longer making premium payments on the original whole life policy.

The other options pertain to different aspects of life insurance and do not accurately describe the Extended Term option. Converting cash value to a new whole life policy does not utilize the Extended Term provision. Redeeming cash value for immediate cash payout signifies terminating the policy rather than extending coverage. Offering a guaranteed cash value at maturity refers to the payout options of a whole life policy rather than the specific Extended Term feature.