What is an Irrevocable Beneficiary?
An Irrevocable Beneficiary is a person or entity named in a life insurance policy who has guaranteed rights to the policy’s benefits, meaning that the policyholder cannot alter or remove the beneficiary designation without their written approval. This differs from a Revocable Beneficiary, who can be changed by the policyholder at any time without consent. The use of an Irrevocable Beneficiary provides a level of security for the beneficiary, ensuring that they receive the policy’s death benefit.
This designation is often used in legal and financial planning to protect the interests of a spouse, children, or business partner. For example, a policyholder might name a former spouse as an Irrevocable Beneficiary as part of a divorce settlement or designate a child to ensure they receive financial support.
Choosing an Irrevocable Beneficiary limits the policyholder’s ability to make changes to the policy, such as taking out a loan against the policy’s cash value or adjusting coverage, without the beneficiary’s consent. It provides assurance to the beneficiary but also requires careful consideration by the policyholder before making such a designation.