An irrevocable beneficiary is a person or entity that cannot be changed on a life insurance policy after it has been issued. This is different from a revocable beneficiary, who can be changed at any time by the policyholder. It’s important to choose an irrevocable beneficiary if you want to ensure that your heirs will receive the proceeds of your life insurance policy upon your death. In this blog post, we will discuss what an irrevocable beneficiary is and why you might want to choose one for your life insurance policy.

Quick Note

Once you start a family, there’s an extent to which your life is no longer your own. You have obligations ranging from the (soccer practice) to the fundamental (earning enough money to support another human being; trying really hard not to die).

But your life insurance policy is your own. Its purpose is to protect your family. You won’t financially benefit from it yourself if the worst should happen. You will get to choose how much to apply for and for how long, and who should benefit from it. But you can’t change an irrevocable beneficiary.

Pros and cons of life insurance

What is a Beneficiary?

A life insurance beneficiary is a person who will receive the payout from a policy if you were to die. The proceeds from the payout can be used to help pay for financial needs. These are needs that come with death. Examples are: funeral arrangements and other end-of-life expenses, or day-to-day bills like the mortgage and child care.

You can name two (or more) people as primary beneficiaries. This will outline the percentage of the policy payout each would be given. You can also name a contingent beneficiary, who could receive the death benefit if something happened to the primary beneficiary. Think of a contingent beneficiary as your “alternate.” With most life insurance policies, you can change your beneficiary designation at any time.

For some, designating two primary beneficiaries — say, a spouse or partner and a parent — may make sense, especially if both could face financial hardship. For others, one primary life insurance beneficiary, with a contingent beneficiary named, makes the most sense. The latter is what we commonly see at my united insurance.

You can have more than one primary beneficiary and more than one contingent beneficiary. You simply need to designate what percentage of your insurance proceeds you want to allocate to each of your beneficiaries. Haven Life, for example, permits up to 10 primary beneficiaries and 10 contingent beneficiaries. No matter how many primary beneficiaries you have, the total percentage allocated must equal 100%. How you divide that 100% is up to you, the policyholder.

What Are Irrevocable Beneficiaries?

These are someone named as a beneficiary of your life insurance policy. They cannot be removed from it unless they agree, ever. If your spouse is an irrevocable beneficiary and you divorce, your spouse is still entitled to remain on the policy. This is regardless of whether you want that. Furthermore, you are not permitted to cancel the policy unless they agree.

Put another way, if you and your spouse don’t stay married “’til death us do part,” you’ll still be joined in life insurance until after your death if they are an irrevocable beneficiary. In some states, irrevocable beneficiaries have the right to approve or deny changes to a policy (such as the amount of coverage), and in others, they only have power over their own stake in the policy. But wherever you live, irrevocable really does mean forever.

Medicare-get-a-quote

What is a Revocable Beneficiary?

You can designate revocable beneficiaries, who you can remove when you want (when a child has grown up and no longer needs the safety net your policy provides, for example), so why would you give up that option? As is often the case with life insurance, one reason is peace of mind. If you have kids and your spouse is the primary caregiver, perhaps they want the security of knowing that even if you divorce, they’ll still be protected financially if you pass away. Life insurance policies are often part of pre-nuptial agreements, including the discussion of irrevocable beneficiaries.

It’s more common to name revocable beneficiaries, and those are either primary beneficiaries or contingent beneficiaries.

In Closing

We hope this article has helped clear up any confusion you had about irrevocable beneficiaries. If you have more questions, please reach out to us and we’d be happy to help. And if you’re looking for life insurance, our friends at My United Insurance can give you a quote in just minutes.