The extended term option is the policyholder's election to convert a lapsed or surrendered whole life policy's cash value into term insurance for the original face amount for a set period. Electing the option avoids immediate loss of coverage but sacrifices ongoing cash value and dividend potential. It is typically chosen when liquidity is tight or when the policy no longer fits long-term goals, buying time while new coverage or funding is arranged.

Producers present the extended term option alongside reduced paid-up choices during nonforfeiture discussions. They model term duration based on current cash value and interest assumptions, then help clients choose the path that best fits near-term affordability and long-term goals. Documentation ensures the election is recorded before grace periods end.