Washington Life Producer Practice Exam

What is a provision that allows a policyowner to withdraw some cash value of a policy without incurring interest?

1. Loan

2. Partial surrender

3. Cash withdrawal

4. Full surrender

The correct answer is: Partial surrender

A provision that enables a policyowner to withdraw a portion of the cash value of a life insurance policy without incurring interest is known as a partial surrender. This option allows policyowners to access money while keeping the policy in force, meaning that the remaining death benefit and cash value continue to be available. When a partial surrender is made, it reduces the overall cash value of the policy but does not create a loan, which typically would involve borrowing against the policy with an expectation of interest being charged. Unlike cash withdrawals that might carry different implications on the policy and often adjust the death benefit, a partial surrender is a straightforward option to obtain cash while maintaining certain key features of the policy intact. This makes partial surrender a beneficial choice for those who need liquidity without the complications associated with loans or full surrenders.