What is Extended Term Insurance?

Extended term insurance is a type of life insurance that is designed to make whole life insurance more attractive. Here are the basics of extended term life insurance and how it works.


When you purchase a whole life insurance policy, part of the premiums that you pay are going to go towards accumulating a cash balance. Over the years, this amount of money can grow to become very substantial. In the past, if you did not continue to pay your insurance premiums, you would have to forfeit this cash balance back to the insurance company. As a way to avoid this potential problem, life insurance companies started providing a non-forfeiture option known as extended term insurance.

Extended Term Insurance

Whenever an individual could not afford to continue paying their premiums, they would instead be able to get extended term insurance. The insurance company would take the cash balance that is remaining on the policy and then use that amount of money to purchase term insurance. The individual would then be covered by a term life insurance policy that lasted for a specific period of time. The length of the term insurance policy would depend on how big the cash balance was at the time of forfeiture.