In the context of insurance practices, what is the primary purpose of nonforfeiture options?

The primary purpose of nonforfeiture options is to prevent policy cancellation without value. Nonforfeiture options are features found in whole life insurance policies that ensure policyholders do not lose all benefits if they stop paying premiums. Instead of having their policy simply lapse, policyholders can choose from several options that provide some form of benefit based on the accumulated cash value of the policy.

These options typically include receiving the cash surrender value, using the accumulated value to purchase a reduced paid-up policy, or using it to extend the term of the policy for a certain amount of time. This serves to protect the policyholder's investment and ensures that they receive some benefit from the premiums they have already paid, even if they can no longer afford ongoing payments.

The other options presented do not align with the core purpose of nonforfeiture options. Increasing insurance premiums directly conflicts with the idea of providing protections to policyholders. Converting policies to whole life is also not a primary function of nonforfeiture options, as they generally apply to policies that have already been established. Limiting insurance coverage does not respect the intent of nonforfeiture options, which is to provide continued value rather than restrict the benefits available to the policyholder.