Which of the following is true about non-forfeiture options in an insurance policy?

The correct statement pertains to the functionality of non-forfeiture options within an insurance policy. Non-forfeiture options are designed to protect the policyholder's interests in the event that they discontinue premium payments. If the cash value of a policy is exhausted, there are no remaining funds available to convert into a non-forfeiture option; therefore, these options cannot be utilized.

Non-forfeiture options typically include things like paid-up insurance, extended term insurance, or the cash surrender value, which only become pertinent when there is remaining cash value in the policy. Once the cash value is depleted, the policyholder has no basis for selecting or exercising these options, hence the truth in the statement that they cannot be utilized if the cash value is exhausted.

This understanding of non-forfeiture options is crucial for both policyholders and agents as it emphasizes the importance of maintaining some level of cash value in an insurance policy to avail these beneficial options in times of financial difficulty.