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What is the Difference between a Revocable and Irrevocable Beneficiary?

So you’ve made the important decision to buy a life insurance policy – good thinking! But now you’re faced with naming a beneficiary (the person/persons who will receive a payout from the policy when you die) and deciding whether your beneficiary will be revocable or irrevocable.

With a revocable beneficiary, the policyholder is free to change both primary and contingent revocable recipients as often as they please,

When it comes to naming a beneficiary, it is up to you. You can name your spouse, children, estate, or a charity or other unrelated party as your beneficiary. You also have the option to name more than one beneficiary, and you can designate how much of the payout each would receive. According to The Balance, you should also consider naming a primary and a contingent beneficiary; a contingent beneficiary is someone who would only receive the death benefit if the primary beneficiary is no longer eligible to obtain the benefits.1

Which brings us to your next consideration: deciding whether you want your beneficiary to be revocable or irrevocable.

According to Investopedia, “a revocable beneficiary does not have guaranteed rights to receive compensation from an entity such as an insurance policy,”2 and “the policy owner reserves the right to make changes to who receives payment, change the terms of the policy, or terminate the policy without the need of revocable beneficiary consent.”2 Investopedia notes that with a revocable beneficiary, the policyholder is “free to change both primary and contingent revocable recipients as often as they please,”2 and this feature is in most life insurance policies.

An irrevocable beneficiary, by contrast, is just the opposite. Investopedia goes on to say that an irrevocable beneficiary “has guaranteed rights to an insurance policy's pay-outs unless they agree to their removal from the policy as a beneficiary.”2 Investopedia gives an example of a wife designating her husband as an irrevocable beneficiary, and even in the event of a divorce, her husband would remain the beneficiary.

There are a number of factors to consider when naming your beneficiary that all boil down to the person(s) you think would be the best recipient(s) of your life insurance policy’s benefit. You also need to consider if you’d like your beneficiary to be revocable or irrevocable, and you need to think about your own circumstances to come to the best decision.

For guidance on naming beneficiaries and on whether those beneficiaries should be revocable or irrevocable, contact a financial advisor. For help navigating the purchase of your life insurance policy and naming your beneficiaries, contact a licensed insurance agent.