Paid-up and Extension Benefits Under the Limited-Payment Plan

As was explained in the previous chapter various contingencies may arise which may cause the insured to view a policy differently from the way he did when he purchased it and which may induce him either to surrender it or to discontinue the payment of premiums. This attitude may be caused by any one of several events, such as loss of earning capacity, death of one's dependents, or impairment of health to such an extent as to make death certain during the period for which extended insurance is granted. Under such circumstances the insured may realize the guaranteed values of his contract as they stand at the time. Either he may surrender the policy for its cash value or effect a loan against that value, and this cash or loan value we have seen is considerably larger under the limited-payment than under the continuous-payment plan. Or the insured may exercise the option of taking paid-up or extended insurance, and these benefits, since the larger cash value is used as a single premium to purchase paid-up or extended insurance at the then attained age, will be greater than under the ordinary life insurance.