Life insurance policies offer payouts generally known as death benefits, which are offered to your beneficiaries, usually your loved ones, after you pass away. This death benefit ensures your family is in good financial support after you can no longer provide for them. The receiver of a death benefit is known as a beneficiary, and you can decide to make them an irrevocable beneficiary. But what is an irrevocable beneficiary?
Making your beneficiary irrevocable secures their rights to the death benefit irrespective of what happens unless they agree to be excluded. An irrevocable beneficiary can be excluded from a life insurance policy anytime without their consent. It is vital to understand the consequences of this option. Thus, you can decide how much control you have over the death benefit and how you prefer your policy to work.
Why Would I Consider an Irrevocable Beneficiary?
People who list an irrevocable beneficiary on their life insurance policy most times do that for peace of mind. For instance, if you work at a very demanding job and your spouse stays at home to take care of the kids. You may decide to list them as an irrevocable beneficiary to make sure they have rights to your policy’s death benefit. Most people choose their children as irrevocable beneficiaries of their policy to make sure they get full access to their death benefit irrespective of what happened to them.
How Does It Work?
After you die, your life insurance death benefit will be paid to those you have named as your beneficiaries in the policy. Life insurance beneficiaries come in two main types, which are revocable and irrevocable. An irrevocable beneficiary has full rights to the death benefit of your life insurance policy unless they agree to be removed.
Even though you would like to change your policy beneficiary. You will be unable to make this change alone, and the person will still have the ability to receive the death benefits due to the contract terms. This can only be removed if they agree to relinquish their rights to your death benefit. This can be challenging because you will need to involve lawyers in the process. It is, however, not as easy as contacting your insurer to change your beneficiary.
What Are the Benefits?
Naming a person as your irrevocable beneficiary comes with several benefits for both you and the receiver. When including an irrevocable beneficiary in your life insurance policy, the following are some of the benefits that come with it:
- It makes sure the death benefit is received by who it is meant for.
- Benefits the children in case of a remarriage or divorce.
When you make a person an irrevocable beneficiary of your policy. No other person has the right to claim your policy’s death benefit, making it a good option for parents.
Downside
While there are several benefits to having this coverage on your policy. Thus, ensure you are aware of the downsides before assigning this to your loved one. These downsides include:
- Irrevocable beneficiaries cannot be changed without their consent. And may lead to complications if you want to make a change privately.
- You have no control over the trust in times of emergencies.
This can make you frustrated because you will no longer have the ability to make any changes after it has been set.
What Happens if I Get Divorced with My Spouse? Who Is My Irrevocable Beneficiary?
If your spouse is your irrevocable beneficiary and you both get divorced. You may find it difficult to change that status. However, if they agree, you can get them out of your policy and make a new beneficiary. But if they don’t, you will be unable to change them. They will remain legally accessible to your death benefit.
Is an Irrevocable Beneficiary the same as a Primary Beneficiary?
This beneficiary is the same as a primary beneficiary. They both take predominance over revocable beneficiaries, making others secondary. Generally, it is very rare for an irrevocable beneficiary to be given a second place; this is because they are more important than other types of beneficiaries.
How to Remove an Irrevocable Beneficiary From a Life Insurance Policy
As mentioned earlier, it is very difficult to remove this beneficiary from your policy. This is because it is permanent unless the beneficiary gives up its rights over the policy’s death benefit. However, unless the beneficiary agrees to it, you can remove them from your policy.