What are 'nonforfeiture options' in a permanent life insurance policy?

Nonforfeiture options give the policyowner alternatives to simply taking cash and walking away when surrendering or stopping premiums on a permanent policy with cash value. Three standard options: (1) Cash surrender — take the accumulated cash value as a lump sum, policy ends; (2) Reduced paid-up insurance — use the cash value to buy a smaller amount of the same type of permanent insurance, fully paid up with no further premiums; (3) Extended term insurance — use the cash value to buy term insurance with the same face amount as the original policy, lasting as long as the cash value will support. The reduced paid-up option preserves permanent coverage at a lower face amount; extended term preserves face amount for a limited time. State law requires these options on most permanent policies.