What describes a reduced paid-up nonforfeiture option?

The reduced paid-up nonforfeiture option provides the policyholder with a reduced death benefit while allowing the policy to remain in force without the need for further premium payments. When opting for this choice, the policy’s cash value is used to purchase a new policy with a lower face amount than the original. This is beneficial for policyholders who wish to maintain some insurance coverage without continuing to pay premiums.

In this scenario, option B is the most accurate description because it emphasizes the key feature of this nonforfeiture option: although the policyholder no longer pays premiums, they still retain a policy, albeit with a reduced face amount compared to the original coverage. Other choices do not accurately reflect the nature of this nonforfeiture option. For instance, having a death benefit equal to the original coverage or receiving cash value only does not align with the principle of a reduced paid-up policy. Moreover, dividends are not typically associated with this type of nonforfeiture option, as it relates more to the policy's structure and benefits rather than any additional profit-sharing components.