What type of rider provides paid-up coverage if the insured cancels or lapses a policy?

A nonforfeiture rider is designed to ensure that an insured individual retains some level of coverage even if they decide to cancel or lapse their insurance policy. This rider is particularly beneficial because it protects the insured's financial investment in the policy and offers a way to maintain some form of life insurance coverage without the need for ongoing premium payments.

When a policyholder chooses to stop paying premiums, the nonforfeiture rider activates, allowing the policy to become a paid-up policy. This means that the policy remains in force with a reduced death benefit, reflecting the premiums already paid. The intent is to prevent the total loss of the policy’s benefits, which can happen if the policy lapses without such a rider.

Other options like elimination, supplemental, and conversion riders serve entirely different purposes. Elimination riders usually relate to specific conditions or benefits that are excluded from coverage; supplemental riders might add additional benefits or coverage options but do not provide guaranteed paid-up status upon cancellation; and conversion riders allow the policyholder to convert a term policy into a permanent policy, which does not address the cancellation aspect directly. Thus, the correct choice is the nonforfeiture rider, as it specifically addresses the situation where the insured cancels or lapses their policy, ensuring