Difficulty: Easy

Average Score: 100%

A revocable beneficiary in a life insurance policy

Rationale

A revocable beneficiary in a life insurance policy has no vested rights in the policy.

A revocable beneficiary can be changed or removed by the policyholder at any time, which means they do not have any permanent claim or vested rights to the policy's benefits until formally designated as an irrevocable beneficiary.

A (has the right to name a contingent beneficiary) YOUR ANSWER

While a revocable beneficiary can be changed by the policyholder, the naming of a contingent beneficiary is not a specific right of the revocable beneficiary. The policyholder retains the authority to make such decisions without needing input from the revocable beneficiary.

B (has no vested rights in the policy) CORRECT

A revocable beneficiary does not have vested rights because their status can be altered at the discretion of the policyholder. Until the beneficiary designation is made irrevocable, they hold no permanent claim to the policy benefits, allowing the policyholder full control over the policy.

C (must grant permission for the insured to surrender the policy) YOUR ANSWER

The revocable beneficiary does not need to provide permission for the policyholder to surrender the policy. The policyholder retains the right to make decisions regarding the policy, including its surrender, without needing consent from any beneficiaries.

D (may demand the cash surrender value of the policy at any time) YOUR ANSWER

The revocable beneficiary cannot demand the cash surrender value, as that right belongs solely to the policyholder. The beneficiary’s role is to receive benefits upon the insured's death, not to access cash values during the policyholder's lifetime.

Conclusion

A revocable beneficiary in a life insurance policy lacks vested rights, as their designation can be altered by the policyholder at any time. This flexibility allows the policyholder to change beneficiaries without needing approval, surrender the policy independently, and manage all aspects of the policy without restrictions imposed by the beneficiary's status.

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