What's an Irrevocable Beneficiary?


Once you start a household, likely to extent that your life is no longer your personal. You've obligations ranging from the banal (soccer practice) to the fundamental (earning enough money to support another human being; trying really hard not to die).

But your lifetime insurance plan is your own. Although its purpose would be to protect your family, and you won't financially benefit from it yourself when the worst should happen, you choose how much coverage to try to get and for just how long, and who should take advantage of it. But you can't change an irrevocable beneficiary.

What is really a beneficiary?

A life insurance beneficiary is really a person who will get the payout from the policy if you were to die. The arises from the payout can be used to help pay for financial needs – those that come with death, such as funeral arrangements and other end-of-life expenses, or day-to-day bills such as the mortgage and day care.

You can name two (or more) people as primary beneficiaries, outlining the proportion of the policy payout each could be given. You can also name a contingent beneficiary, who could receive the death benefit if something happened to the primary beneficiary. Imagine a contingent beneficiary as your “alternate.” With most life policies, you can improve your beneficiary designation at any time.

For some, designating two primary beneficiaries – say, a spouse or partner along with a parent – could make sense, especially if both could face financial hardship. For other people, one primary life insurance beneficiary, having a contingent beneficiary named, makes the most sense. The second is exactly what we commonly see at Haven Life.

You might have more than one primary beneficiary and most one contingent beneficiary; you simply need to designate what number of your lifetime insurance proceeds you want to allocate to each of your primary beneficiaries. Haven Life, for example, permits up to 10 primary beneficiaries and 10 contingent beneficiaries. Regardless of how many primary beneficiaries you've, the entire percentage allocated must equal 100%. How you divide that 100% can be you, the policyholder.

What are irrevocable beneficiaries versus revocable beneficiaries?

An irrevocable beneficiary is someone named as a beneficiary in your life insurance plan who cannot be taken off it unless they agree. Ever. If, for example, your partner is definitely an irrevocable beneficiary and you divorce, your partner continues to be entitled to stick to the policy, regardless of whether you want that. Furthermore, you aren't able to cancel the insurance policy unless they agree.

Put one other way, should 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 certain states, irrevocable beneficiaries possess the right to approve or deny changes to a policy (such as the amount of coverage), and in others, they merely have power over their very own stake within the policy. But wherever you live, irrevocable really does mean forever.

You can designate revocable beneficiaries, whom you can remove when you want (whenever a child is growing up and no longer needs the safety net your policy provides, for example), kind you allow up that option? As is often the case with life insurance coverage, one good reason is peace of mind. If you have kids and your spouse is the primary caregiver, perhaps they need the security of knowing that even if you divorce, they'll be protected financially should you pass away. Life policies in many cases are part of pre-nuptial agreements, such as the discussion of irrevocable beneficiaries.

It's more prevalent to name revocable beneficiaries, and those are generally primary beneficiaries or contingent beneficiaries.

How often should I review my beneficiaries?

People move. Relationships change. Life – happens. It's a good idea to examine your beneficiaries at least once a year to ensure your beneficiary designation is up to date. Remember, you can always change, add or remove revocable beneficiaries, but not irrevocable ones.

Whether your beneficiaries are revocable, irrevocable, or a mixture of the two, it's important to choose carefully, and (assuming you have at least some revocable beneficiaries) to examine your beneficiaries from time to time to make sure your policy does the thing you need. A life insurance policy enables you to financially protect the folks you like. Choosing who your beneficiaries are and just how they're designated is an important part of that process.