South Carolina Life Insurance Practice Exam

In a life insurance policy, who typically benefits from cash values?

1. The insured

2. The employer

3. The policyowner

4. The beneficiaries

The correct answer is: The policyowner

The cash value in a life insurance policy is a feature associated with certain types of permanent life insurance, such as whole life or universal life policies. The policyowner has the right to access this cash value while the policy is in force. This built-up cash value can be borrowed against, withdrawn, or used to pay premiums, offering the policyowner flexible options for utilizing their policy. As the policyowner is the individual who has control over the policy, they have the ability to manage how the cash value is used. While the insured is the individual whose life is covered by the policy, they do not have ownership rights to the cash value unless they are also the policyowner. Employers can offer group life insurance policies, but generally, they do not own individual policies that accumulate cash value; this feature is typically absent in such plans. Beneficiaries do not receive any cash value benefits as they receive the death benefit upon the death of the insured; their connection to the policy pertains to the payout after the insured's passing and not to any cash value within the policy during the policyowner's lifetime.