Washington Life Producer Practice Exam

A life insurance policyowner does NOT have the right to?

1. Change beneficiaries

2. Revoke an absolute assignment

3. Convert term insurance to permanent insurance

4. Borrow against cash value

The correct answer is: Revoke an absolute assignment

The correct answer, which indicates that a life insurance policyowner does not have the right to revoke an absolute assignment, is based on the principle of absolute assignment in insurance. When a policyowner makes an absolute assignment of their policy, they are transferring ownership of the policy to another party, which includes the rights to make changes, receive benefits, and take actions regarding the policy. Once this assignment is made, the original policyowner cannot simply reverse this action and regain ownership or rights over the policy. Absolute assignment is a permanent transfer and the new owner has full control over the policy. This permanence is what distinguishes absolute assignments from collateral assignments, where the original owner retains some rights, such as the ability to revoke. In contrast, the rights to change beneficiaries, convert term insurance to permanent insurance, and borrow against cash value are generally retained by the policyowner as these actions reflect the ongoing ownership and control over the policy. Understanding these distinctions is crucial for anyone studying life insurance principles and the rights attached to different types of ownership and assignments.