Under a life insurance policy, which party holds the right to name or change the beneficiary, assign the policy, and surrender it for its cash value?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
In life insurance, the policyowner — who may or may not be the same person as the insured — holds all contractual rights under the policy. These rights include naming and changing the beneficiary (where the designation is revocable), assigning the policy to another party, borrowing against the cash value, changing premium modes, and surrendering the policy for its cash value. The insured is simply the person whose life is covered and has no automatic control over the contract unless the insured is also the owner. The beneficiary has only a right to receive proceeds upon the insured's death, not an ownership interest while the policy is in force.
Why the other options are wrong
- B) The insured's role is limited to being the person whose life is insured; the insured has no automatic right to change benefits, assign the contract, or surrender it unless the insured is also the policyowner.
- C) The underwriter evaluates the risk at issue and thereafter the insurer administers the contract, but the insurer has no right to surrender the policy or change beneficiaries at will.
- D) The beneficiary is entitled to the death proceeds but holds no ownership rights during the insured's lifetime and cannot exercise policyowner privileges.
Memory hook
Owner controls, insured just lives, beneficiary only collects. Rights follow the policyowner, not the life.