PSI Life Exam Practice Test

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Prepare for the PSI Life Exam with comprehensive tests. Utilize flashcards and multiple-choice questions, complete with hints and explanations for each question. Achieve exam success!

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What is the primary purpose of a nonforfeiture option in life insurance?

To allow the owner to exchange for a different policy
To help maintain coverage despite non-payment
To reduce future premium costs
To guarantee a payout to beneficiaries

The correct answer is: To help maintain coverage despite non-payment

The primary purpose of a nonforfeiture option in life insurance is to help maintain coverage despite non-payment. Nonforfeiture options are designed to ensure that policyholders do not completely lose the value they have accrued in their life insurance policies if they stop paying premiums. When a policyholder can no longer afford to pay premiums, they may opt for these features that allow them to use the accumulated cash value of the policy to keep some form of coverage without having to make further premium payments. This ensures continued protection for the insured and benefits for beneficiaries, even in times of financial difficulty. The other choices relate to aspects of insurance that are not the central function of nonforfeiture options. They may involve policy conversions or financial adjustments, but do not specifically address the underlying goal of maintaining coverage without premium payments.