What Is Extended Term Insurance?

Extended term insurance transforms the cash value of your permanent life insurance policy into term life coverage, extending your protection for a set period without further payments.

To activate the extended term nonforfeiture option, a policyholder must have enough cash value in the life insurance policy to fund the new term coverage. This keeps the death benefit unchanged from the original permanent life insurance, continuing the policyholder's coverage.

Your cash value funds the extended term coverage, keeping the death benefit consistent with the original coverage terms.

Here are the advantages and limitations of extended term life insurance to help you decide if it fits your needs and financial goals.

Many people confuse "extended term insurance" with "extending term life insurance," but these are completely different concepts. Extended term insurance is a nonforfeiture option for permanent policyholders (whole life or universal life) that converts accumulated cash value into temporary term coverage, maintaining your full death benefit without premium payments.

Extending term life insurance refers to renewing or converting an existing term policy at expiration. Term policies can't offer extended term insurance since they lack cash value. Instead, term policyholders face renewal at higher rates, conversion to permanent coverage or policy expiration — entirely different solutions with distinct costs and requirements.

A nonforfeiture clause in life insurance protects policyholders from losing their policy's value if they cannot continue making premium payments. These clauses offer a safety net, allowing policyholders to retain some benefits through reduced coverage or accumulated cash value.

The extended term life insurance nonforfeiture option is standard under this clause. It allows policyholders to convert their permanent life insurance into term life insurance using their accumulated cash value.

To calculate costs for extended term insurance, insurers use the accumulated cash value of the permanent life policy and the insured's age at the time of conversion. This provides coverage continuation without new premium payments.

Insurers apply the total cash value as a prepaid premium for the term insurance, which determines the term's duration. The insured's age influences the cost per year of term coverage, determining how long the cash value can maintain the policy.

Extended Term Cost Factors

Most insurers provide extended term calculations during application, showing how much coverage would cost.

• Your current age (older ages = higher annual costs = shorter coverage periods)
• Cash value amount (more cash = longer coverage periods)
• Original policy death benefit amount
• Health class from your original policy
• Interest rates used in policy calculations

Although extended term life insurance offers a valuable solution for maintaining coverage during financially restrictive times, it may not be suitable for everyone. People seeking long-term security without the need to monitor cash value accumulation or those who can comfortably afford ongoing premiums might prefer other types of life insurance policies that provide permanent coverage without the need for conversion.

Choosing the right nonforfeiture option depends on your financial circumstances and coverage goals. Cash surrender provides immediate money, paid-up insurance offers permanent but reduced coverage, and extended term insurance continues full coverage for a set period without ongoing costs.

• Cash Surrender Value: This option allows you to cancel your policy and receive the accumulated cash value as a lump sum. It works best for people needing immediate cash access who are willing to give up future coverage. The cash surrender value usually equals less than the total premiums paid but provides substantial immediate funds.
• Paid-Up Insurance: This option reduces your policy's death benefit to a level your existing cash value can support without further premiums. This option suits people wanting lifelong coverage but unable to continue paying premiums. You maintain smaller coverage indefinitely without additional costs.
• Automatic Premium Loan: Some policies offer automatic premium loans that use cash value to pay premiums when you miss payments. This keeps your original policy active longer but reduces available cash value and death benefit by the loan amounts plus interest.

Extended term insurance is a nonforfeiture option available within permanent life insurance policies accumulating cash value. This feature allows policyholders to use the accumulated cash value to purchase term insurance, continuing life coverage without further premium payments.

The extended term insurance nonforfeiture option provides a solution for people experiencing financial changes that impact their ability to maintain regular premium payments on a permanent life policy.

Common questions about extended term insurance and how this nonforfeiture option can benefit you.

Why Trust MoneyGeek? We analyzed 1,488 life insurance quotes alongside customer satisfaction ratings, financial stability reports, product offerings and more to determine the best life insurance companies for a variety of needs. 

Recency
Coverage costs and company information for life insurance providers were updated in 2025.

Methodology

MoneyGeek created a scoring system to compare life insurance companies across five categories and ranked them based on their scores. We chose to review these companies based on their broad national coverage and ability to provide an online quote. 

MoneyGeek’s Scoring System

In our scoring system, companies can earn up to five points in each category. We then use these category scores to calculate an overall MoneyGeek score out of 100. We applied the following weightings to score insurers:

• Affordability: 30%
• Financial Stability: 25%
• Buying Process: 20%
• Customer Satisfaction: 15%
• Product Diversity: 10%

Each company’s score incorporates the following:

• Cost data obtained through online quotes
• Financial strength ratings from AM Best and number of years in business
• Customer satisfaction data from the National Association of Insurance Commissioners (NAIC) customer complaint index (we reviewed annual complaint data from 2020 to 2022, the most recent year available)
• Availability of tools to aid in the buying process, such as online product materials and multiple payment options
• Diversity of life insurance products offered

Sample Customer Profile

• MoneyGeek used a standard profile to obtain life insurance quotes:
• 40-year-old male
• Nonsmoker
• 5 feet 11 inches tall and 175 pounds
• Excellent health rating

Premiums are based on the standard profile unless otherwise noted.

We modified the profile by age, gender, height, weight, tobacco use, health rating and geographic location to collect various quotes and determine the best life insurance company for several types of customers. We also collected quotes for term life insurance with varying term lengths and coverage amounts.

We identified trends in the data set and used those patterns to calculate projections and extend the data beyond what was initially collected.