Which option allows for continued coverage if premiums are not paid?

The correct answer is that nonforfeiture options allow for continued coverage if premiums are not paid. Nonforfeiture options are designed to protect policyholders by providing them with benefits even if they stop paying premiums. These options typically apply in situations where the policyholder has accrued some value in their policy, such as in whole life insurance. Instead of losing the benefits entirely, policyholders can access options like reduced paid-up insurance or extended term insurance, allowing them to retain some level of coverage even after premium payments cease.

These options are critical because they ensure that policyholders do not completely lose their investment in the policy when facing financial difficulties. While grace periods allow a policyholder additional time to pay premiums without losing coverage, they do not provide ongoing coverage if the payment is ultimately not made. Reinstatement involves restoring a lapsed policy through payment of back premiums, whereas the conversion privilege typically refers to the right to convert a term policy to a permanent policy, which does not address missed premium payments directly. Nonforfeiture options specifically cater to the scenario where premiums are unpaid, ensuring some level of continued coverage.