What is the effect on the face amount of a policy when the reduced paid up nonforfeiture option is chosen?

When the reduced paid-up nonforfeiture option is chosen, the face amount of the policy is reduced to the amount that the policy's cash value would buy as a single premium. This option allows the policyholder to stop paying premiums while still maintaining a form of coverage. Essentially, the cash value of the policy is applied toward the purchase of a new, fully paid-up policy, which has a lower face amount than the original policy.

This reduction in face amount reflects the fact that the insurer is using the cash value to secure a new policy without ongoing premium payments. The new policy is paid up, meaning no further payments are needed, but the coverage will be less than what was originally established under the original policy's terms. This is particularly beneficial for policyholders who wish to preserve some level of coverage without the financial burden of continued premium payments.