What is the objective of the extended term insurance option?

The objective of the extended term insurance option is to utilize the cash value accrued in a whole life insurance policy to effectively purchase a term insurance policy for a specified period. This option is particularly valuable for policyholders who no longer want to pay premiums but still want to maintain some level of life insurance coverage.

When the insured chooses this option, the policy’s cash value is used to buy a term policy with the same face amount as the original whole life policy. This allows the individual to retain coverage without needing to make further premium payments for a designated term duration, which can be an essential feature for those who may be temporarily unable to afford premiums or who wish to maintain some life insurance protection for beneficiaries during the term period.

The other choices do not directly address the primary purpose of this option. Immediate cash payout is not relevant since extended term insurance focuses on coverage rather than cash distribution. The conversion to a whole life policy with lower premiums does not pertain to the nature of the extended term option, which is about extending coverage rather than converting policy types. Lastly, increasing cash value over time is an aspect of whole life insurance itself and not the goal of extending term coverage.