What is "extended term insurance"?

Extended term insurance is a non-forfeiture option specifically designed for policyholders who have a whole life insurance policy. When the policyholder decides to stop paying premiums or if the policy has lapsed due to non-payment, the extended term insurance allows them to convert the remaining cash value of their whole life policy into a term life insurance policy. This conversion typically provides coverage for a specified number of years, equivalent to the cash value accumulated, without requiring additional premium payments.

This option enables the policyholder to retain some level of life insurance coverage for a certain duration, which can be particularly beneficial during times when maintaining whole life premiums is financially challenging. The key characteristic of extended term insurance is that it does not build cash value like whole life policies, but it does provide temporary coverage based on the accrued cash value. This is particularly valuable for individuals who still want a death benefit for a limited time after their whole life policy has lapsed.