Life Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
In a life insurance contract, which statement correctly describes the difference between the policyowner and the insured?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
The policyowner owns the contract and exercises every right under it — naming or changing beneficiaries, assigning the policy, borrowing against cash value, and surrendering the policy. The insured is simply the person whose life is covered and need not be the policyowner. The two can be the same individual or different people, as long as the policyowner has an insurable interest in the insured's life at inception (CIC §10110). Premiums are the policyowner's obligation, and the death benefit is payable to the beneficiary the policyowner names.
Why the other options are wrong
- B) Premium payment is the policyowner's duty, not the insured's. The insured has no obligation to fund the contract, and the death benefit is payable to the beneficiary designated by the policyowner, not to the insured.
- C) Policyowner and insured may be different people. The only requirement is that the policyowner have an insurable interest in the insured's life at the time the policy is issued; identity between the two is never mandatory.
- D) Cash value, loans, and all ownership rights belong to the policyowner, who may surrender or borrow against the policy. The insured, as the person whose life is covered, has no ownership interest in the contract.
Memory hook
Owner runs the contract; insured is only the life covered. Rights ride with the owner.