Irrevocable Beneficiary

An irrevocable beneficiary on a life insurance policy cannot be changed or removed without the beneficiary’s consent. 

What is a life insurance beneficiary?

A life insurance beneficiary is the person, people, trust, organization, or estate that a policyholder names as the potential recipient(s) of life insurance benefits (also called the “death benefit”) if they were to pass away. 

Policyholders pay life insurance premiums , and in exchange—if they die, and the life insurance claim is approved—the life insurance company issues a cash payout to the loved ones named as beneficiaries on the policy. This payout (also called the “death benefit”) is generally given in a lump sum, without any taxes being owed on it.

The death benefit can be spent without limitations, and is often used to pay for things like funeral costs, childcare, mortgage payments, and household expenses.

So, what's an irrevocable beneficiary?

In your life insurance policy, there are two different types of beneficiaries: primary and contingent. The person or people you name as your primary beneficiaries are the first in line to receive the death benefit if you were to pass away. Contingent beneficiaries only get the payout if your primary beneficiaries pass away themselves, or are legally unable to accept benefits.

Among your primary beneficiaries, you can (but don’t have to) designate an irrevocable beneficiary. Children, spouses, and ex-spouses are often named as irrevocable beneficiaries. 

Policyholders cannot change or remove irrevocable beneficiaries without their explicit consent. Irrevocable beneficiaries are also required to sign off on changes to the policy. In many ways, irrevocable beneficiaries are like “co-owners” of the policy, along with the policy owner themselves. 

Revocable beneficiaries, whether they’re primary or contingent, don’t sign off on policy changes, and can have their allocation of the death benefit changed, or be removed from the policy altogether, without being informed beforehand.

Why would I want an irrevocable beneficiary?

Adding a beneficiary to your policy that you need to keep in the loop about every change might sound like a pain, but it could be the right move depending on your circumstances. Here are some examples of circumstances and life changes that might justify naming an irrevocable beneficiary: 

  • If you’re signing a prenuptial agreement. If you’re interested in signing a prenup, life insurance policies are often on the table. You or your future spouse can choose to negotiate whether they wish to be named as an irrevocable beneficiary during these discussions—so, if you were ever to get divorced, you’d still get the death benefit payout (see below). 
  • If you’re going through a divorce. If you’re getting divorced, a court could decide to name you or your ex-spouse as irrevocable beneficiaries on the other person’s life insurance policy. This is often the case when one parent relies on child support. By being named on a policy as an irrevocable beneficiary, the parent can continue to receive help for the care of their children even if their ex-spouse were to pass away.
  • If you’re remarrying. Policyholders might name a child as an irrevocable beneficiary in the event that they’ve had multiple marriages. If a child is named as an irrevocable beneficiary, and their parent dies, there would be basically no way for a step-parent to change or challenge the policy so they could receive life insurance death benefits instead.

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