What occurs to a life insurance policy's cash value if the policy owner selects an extended term insurance option?

When a policy owner selects the extended term insurance option, the cash value of the life insurance policy is typically used to purchase a term insurance policy for the same face amount as the original policy. This conversion to term insurance means that the cash value is effectively expended to ensure coverage for a specified period rather than remaining accessible as cash value within the original policy. As a result, the cash value is no longer available to the policy owner, leading to the conclusion that the cash value is lost in this transaction.

In this context, the extended term option allows the insured to maintain coverage without further premium payments, but it does so at the cost of the existing cash value, which cannot be utilized in other forms once the choice is made. This mechanism is designed to maximize the policy owner's ability to maintain life insurance protection even in financial transition, but it comes at the cost of relinquishing the cash value.