Glossary

Extended term insurance

A nonforfeiture option that uses a lapsed policy's cash surrender value to buy term coverage for the full face amount for as long as the money lasts.

Also called: extended term option, extended term nonforfeiture option, ETI

Extended term insurance is one of the nonforfeiture options built into whole life and other cash value policies. If the owner stops paying premiums, state nonforfeiture laws keep the accumulated value from being lost, and one choice is to use the net cash surrender value as a single premium to buy term insurance for the policy's full face amount, less any loans. Coverage lasts for a fixed period that depends on the insured's age and the amount of cash value, and then ends.

Hypothetical example: a 55-year-old stops paying on a $200,000 whole life policy with $30,000 of cash surrender value. Under extended term, the insurer might keep the full $200,000 death benefit in force for about 14 years with no further premiums. If he dies within that window, the beneficiary receives $200,000; after it, coverage ends with no cash value left.

Many policies make extended term the automatic option if the owner neither pays nor chooses. The other main nonforfeiture options are reduced paid-up insurance, which provides a smaller permanent benefit, and taking the cash. Extended term suits someone who still needs the full amount for a known period; it is a poor fit if lifetime coverage matters. See nonforfeiture options: reduced paid-up and extended term and what happens if you stop paying life insurance premiums.

Last reviewed October 4, 2026

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Related terms

Reduced paid-up insurance A nonforfeiture option that uses a policy's cash value to buy a smaller, fully paid permanent policy so no more premiums are due. Cash surrender value What a permanent policy pays the owner on cancellation: the accumulated savings minus surrender charges and any outstanding loans. Lapse The end of coverage because a premium went unpaid past the grace period or, in universal life, because cash value could no longer cover the charges. Whole life insurance Permanent life insurance with fixed premiums, a guaranteed death benefit and guaranteed cash value growth, sometimes boosted by dividends. Paid-up policy A permanent life policy that needs no more premiums yet stays in force for life, because past premiums or its cash value have fully funded it.

Related guides

Automatic premium loans An automatic premium loan pays missed premiums from your cash value. How it works, what it costs, and the lapse and tax risks of leaving it running. Nonforfeiture options: reduced paid-up and extended term What you can do with a permanent policy's cash value if you stop paying premiums: take cash, buy reduced paid-up insurance or extended term, and how each works. What happens if you stop paying life insurance premiums Missed premiums start a grace period. After it, term coverage ends, while permanent policies may draw on cash value or convert to paid-up or extended term.