When it comes to how you want your life insurance benefits to be distributed, it's important to consider all of your available options. Here's what you need to know about irrevocable and revocable life insurance beneficiaries.
What is a life insurance beneficiary?
A life insurance beneficiary is a person or entity you designate to receive your life insurance death benefits after you pass. This can be a spouse, child, loved one, friend or even an organization.
As you go through the process of purchasing a life insurance policy, take the time to consider exactly who you'd like to designate as your beneficiary. With life insurance, you have a few common options for designating beneficiaries, including a "revocable" or "irrevocable" designation. It's important to understand the key differences between these types of beneficiaries before you make any final decisions.
What is a revocable beneficiary?
With a revocable beneficiary, the person or entity you choose has no legal interest in the death benefit during the insured person's lifetime. The policy owner is in total control. A revocable beneficiary may be changed at any time by the policy owners without the consent of the currently named beneficiaries.
What is an irrevocable beneficiary?
An irrevocable beneficiary is a person or entity who is designated to receive the assets in your life insurance policy and cannot easily be changed or removed unless they consent. As an irrevocable beneficiary, the person or entity chosen has certain rights with regard to the death benefit of your policy.
For example, if you decide to change a named beneficiary, the current irrevocable beneficiary/beneficiaries must sign off on these changes as well. It’s not simply switching out a name.
Naming your beneficiaries
With a life insurance policy, you're allowed to name more than one person or entity as your beneficiary. You can also designate primary, secondary and tertiary beneficiaries. In these cases, if the primary beneficiary listed passes away before you, the benefits would then pass to your secondary beneficiary, and so on.
Advantages of naming an irrevocable beneficiary
Assigning an irrevocable beneficiary ensures the life insurance death benefit goes to the individual/s you intended. Irrevocable beneficiaries can be particularly useful in cases of divorce, second marriages and blended families. If the policyholder wishes to ensure the death benefit goes to their biological children as opposed to a spouse or step-children, for example, naming irrevocable beneficiaries may be a good option.
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