A provision that allows a policy owner to withdraw a policy's cash value interest free is a

• A. Nonforfeiture provision
• B. Partial surrender
• C. Payor rider
• D. Collateral assignment

Answer: (C)

The idea being tested is how a permanent life policy’s cash value can be accessed without paying interest. When a policy has built-up cash value, you can get at that money in a few ways. Taking a loan against the cash value usually means paying interest on what you borrow. But you can also withdraw part of the cash value directly. This kind of withdrawal is not a loan, so there’s no interest charged by the insurer.

This option is tied to the policy’s nonforfeiture provisions. One way to use it is a partial surrender, where you take out part of the cash value while keeping the policy in force. The amount you withdraw reduces the cash value and can also reduce the death benefit, but you’re not paying interest on the withdrawn funds.

The other features mentioned don’t fit this scenario: a payor rider is about waiving or assuming premium payments if the insured or payor becomes disabled or dies; collateral assignment uses the policy as collateral for a loan; and nonforfeiture provisions cover what happens if you stop paying premiums, including cash surrender value, but the specific idea of withdrawing cash value without interest is most directly described by the withdrawal/partial surrender concept under the nonforfeiture framework.