South Carolina Life Insurance Practice Exam

Who is entitled to the cash values in a life insurance policy?

1. The policyowner

2. The insurance company

3. The beneficiaries

4. The insured

The correct answer is: The policyowner

In a life insurance policy, the policyowner is entitled to the cash values. This is because the policyowner has control over the policy, including the decision-making rights regarding policy loans, withdrawals, or cash surrenders. The cash value accumulates over time, and it is essentially an asset that belongs to the policyowner. When a policy has a cash value component, it allows the policyowner to access these funds while the insured is still alive. This feature is typically associated with permanent life insurance policies, such as whole life or universal life insurance. The other parties mentioned—such as the insurance company, beneficiaries, or the insured—do not have rights to the cash value unless specifically granted by the policyowner. The insurance company maintains the cash value as part of its liability but does not possess rights to these funds. Beneficiaries receive the death benefit upon the passing of the insured, and they do not have any claim to the cash value during the life of the policy. The insured is the individual covered by the policy but does not hold rights to the cash value unless they are also the policyowner.