Which nonforfeiture option allows policyholders to cash out their whole life insurance policy's cash value?

The cash surrender option is a nonforfeiture option that allows policyholders to receive the cash value accumulated in their whole life insurance policy if they choose to discontinue the policy. This option is particularly advantageous for those who may need cash for emergencies or other financial needs, as it grants immediate access to the policy's savings component. When a policyholder exercises this option, they essentially terminate the policy, receiving the cash value without any further obligations for future premiums.

In contrast, other nonforfeiture options do not provide a cash payout. The policy loan option allows the policyholder to borrow against the cash value but does not “cash out” the policy. The reduced paid-up option converts the policy into a paid-up insurance status for a lower face amount, while the extended term option uses the cash value to purchase paid-up term insurance for a specified period but does not provide any immediate cash. Each of these alternatives serves different purposes, but when it comes to accessing the policy's cash value directly, the cash surrender option is the clear choice.