What is the difference between a revocable and irrevocable beneficiary?

What is the difference between a revocable and irrevocable beneficiary?

• A. A revocable beneficiary can be changed by the policy owner without consent; an irrevocable beneficiary requires consent to change or surrender rights.
• B. A revocable beneficiary has no rights to the policy proceeds; irrevocable beneficiary can change policy owner.
• C. An irrevocable beneficiary can be removed by the policy owner at any time without consent; revocable requires consent.
• D. A revocable beneficiary cannot be changed; irrevocable beneficiary can be changed freely.

Answer: (B)

Understanding how beneficiary status affects control and rights in a life policy is what this question examines. When a beneficiary is revocable, the policy owner can change or remove that designation at any time without needing the beneficiary’s permission. This gives the owner flexibility, but the beneficiary has no guaranteed, unalterable claim to the proceeds. When a beneficiary is irrevocable, the designated person has enforceable rights to the proceeds, and the owner cannot change the beneficiary, surrender the policy, or borrow against the cash value without the irrevocable beneficiary’s consent. This arrangement protects the beneficiary, but it limits the policy owner's ability to make changes. Note that revocable beneficiaries do have a claim to the proceeds, but their rights can be altered by the owner, whereas irrevocable beneficiaries’ rights are protected and require their consent for changes that would affect them.

Understanding how beneficiary status affects control and rights in a life policy is what this question examines. When a beneficiary is revocable, the policy owner can change or remove that designation at any time without needing the beneficiary’s permission. This gives the owner flexibility, but the beneficiary has no guaranteed, unalterable claim to the proceeds.

When a beneficiary is irrevocable, the designated person has enforceable rights to the proceeds, and the owner cannot change the beneficiary, surrender the policy, or borrow against the cash value without the irrevocable beneficiary’s consent. This arrangement protects the beneficiary, but it limits the policy owner's ability to make changes.

Note that revocable beneficiaries do have a claim to the proceeds, but their rights can be altered by the owner, whereas irrevocable beneficiaries’ rights are protected and require their consent for changes that would affect them.