Life · Chapter 5 · Cash Value

Reduced Paid-Up Option

Definition

Uses cash value as a single premium to buy a smaller paid-up permanent policy — no more premiums, still builds cash value. Coverage for the LONGEST time.

Exam tip

Reduced paid-up = SMALLER face, permanent. Extended term = SAME face, temporary (and the default). Don't confuse with paid-up ADDITIONS (a dividend option that INCREASES coverage).

Easy to confuse with

These are what this term gets tested against — if you can't tell them apart cold, drill the contrast.

Extended Term Option Nonforfeiture Options Paid-Up Additions (Dividend Option)

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