Under a life insurance policy, which party generally has the right to change the beneficiary, assign the policy, and exercise the policy loan privilege?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
The policyowner, who may or may not be the insured, holds all rights under the contract: naming and changing beneficiaries while the right is revocable, assigning or transferring ownership, borrowing against the cash value, choosing settlement options, and surrendering the policy. The insured is merely the person whose life is the subject of the contract and has no contractual rights unless he or she is also the owner. Understanding who holds these rights is essential because ownership rights can be transferred independently and survive changes in the insured's personal circumstances.
Why the other options are wrong
- A) The insured's role is limited to being the person whose death triggers the benefit; unless the insured is also the owner, he or she holds no contractual rights under the policy.
- C) The beneficiary is entitled to the proceeds only after the insured's death and generally cannot change, borrow against, or assign the policy during the insured's lifetime.
- D) The agent represents the insurer in the sale and service of the policy and holds no ownership or policy rights in the contract.
Memory hook
Owner rules the contract; insured is just the life at risk; beneficiary waits at the finish line.