Question 19

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

A revocable beneficiary does not have any vested rights in the life insurance policy, meaning that the policyholder can change or revoke the beneficiary designation at any time without the beneficiary's consent.

A) has the right to name a contingent beneficiary

While a revocable beneficiary may have the ability to suggest a contingent beneficiary, this is not a defining feature of their status. The primary characteristic of a revocable beneficiary is the policyholder's control over the designation, rather than any specific rights to name others.

B) has no vested rights in the policy

This statement is correct as a revocable beneficiary does not possess vested rights in the policy. This means that the policyholder retains the authority to alter or revoke the beneficiary designation without the need for the beneficiary's approval.

C) must grant permission for the insured to surrender the policy

This option is incorrect as a revocable beneficiary does not have the right to grant or deny permission for the policyholder to surrender the policy. The policyholder retains full control over the policy and its benefits.

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

A revocable beneficiary cannot demand the cash surrender value of the policy. Only the policyholder has the authority to access or surrender the policy for its cash value, regardless of the beneficiary designation.

Conclusion

The correct answer, that a revocable beneficiary has no vested rights in the policy, clearly highlights the policyholder's continued control over the beneficiary designation. All other options misrepresent the rights and powers associated with a revocable beneficiary, reinforcing that such beneficiaries do not hold any claims to the policy or its values until the policyholder chooses to establish a vested interest.