What happens to a policy's cash value when an extended term nonforfeiture option is utilized?

When an extended term nonforfeiture option is utilized, the policy's cash value is converted into term insurance that maintains the same face value as the original policy. This means that instead of receiving the cash value in a different form, like a lump sum or surrendering the policy, the policyholder chooses to use the cash value to purchase a term insurance policy.

This type of nonforfeiture option is designed to provide the policyholder with continued coverage, albeit temporarily, without requiring any further premium payments. The term insurance created by the cash value lasts for a specified period that is determined based on the amount of cash value available and the premium cost for the term coverage. This ensures that the insured retains the death benefit protection, even if they can no longer maintain the original whole life or permanent insurance policy, effectively preserving the policyholder's interests while leveraging the accumulated cash value.