Which of the following options can nullify reinstatement privileges within three years?

The reason taking a cash payout can nullify reinstatement privileges within three years is that it effectively cancels out the insurance policy's provisions related to its active status. When a policyholder opts to receive a cash payout, they are essentially surrendering the policy, which removes their ability to reinstate it later. This decision impacts the contractual obligations of the insurance company and the policyholder’s rights under the policy, leading to the nullification of any reinstatement options that might have been available.

In contrast, changing the beneficiary, borrowing against the cash value, or reducing the death benefit typically do not cancel the policy itself or eliminate reinstatement privileges. These actions are generally permissible within the context of maintaining the policy’s active status and do not lead to the forfeiture of the privileges associated with reinstating a policy after it has lapsed. Therefore, taking a cash payout is the only option that directly impacts the reinstatement terms within the specified time period.