Extended term insurance is life insurance is a life insurance policy where the policy holder stops paying the premiums but still has the full amount of the policy in effect for whatever term the cash value permits.

Not The Same as Extended Coverage

This is not to be confused with extended coverage, a term used in the property insurance business. Which is the extension of property insurance beyond coverage for fire and lightning.

In Insurance Terms, Extended Term Insurance Is Defined As..

This type of insurance is defined as a default non-forfeiture option. The face amount of the policy stays the same, but it’s changed to an extended term insurance policy. The equity built up is used to purchase a term policy that equals the number of years you paid premiums.

It’s not another form of insurance, but an option for the Whole Life Insurance policy. Whole life insurance gives a death benefit and a cash value based on fixed payments that is paid by the policyholder. The case value is paid to the insured in case that they do not die during the term of the policy.

The Benefit Of The Extended Term Insurance

An Extended Term Insurance Non-forfeiture clause is designed to allow the insured to receive the benefits on the premiums that were paid on a whole life insurance policy even if the policyholder missed any premium payments which results in the policy becoming null.

How This Type Of Insurance Came Into Being

During financial loss or other reasons, policy holders may fail to pay whole life insurance premiums.  Usually the insurance company would get the cash value of the policy.  The death benefit would continue if there was sufficient cash value to pay the premiums.  This was changed, and not there is a non-forfeiture policy.  The Option the cash value instead of being forfeited, it gets converted into an extended term insurance.  If there is cash value left in the whole life insurance policy it goes into extending the policy into an extended number of years.