What is a Revocable Beneficiary?
A revocable beneficiary is someone who the policy owner names to receive the benefit of a life insurance policy when the insured passes away. Moving forward, the policy owner can change both the policy and any beneficiaries without the revocable beneficiary’s consent. By default, life insurance beneficiaries are revocable.
The basics of beneficiaries
For example, an individual might buy life insurance on themselves and name their spouse as a beneficiary. That way, their spouse will get the policy benefit (i.e., a lump-sum payout from the life insurance company) should the insured individual die prematurely. The spouse/beneficiary can then use that money however they want or need. It can cover funeral costs, for example, along with the mortgage or rent, groceries, tuition for their children, and more.
A life insurance policy owner may name a single beneficiary who gets the policy’s death benefit in its entirety, but they may also name multiple beneficiaries and specify how that benefit gets distributed between them.
Flexibility with revocable beneficiaries
Revocable beneficiaries are exactly what they sound like: beneficiaries that the policy owner can remove or adjust as they see fit. That juxtaposes with irrevocable beneficiaries. These beneficiaries are locked in; the policy owner will need their written permission to remove them from the policy or to make a broad range of policy adjustments.
Revocable beneficiaries give the policy owner flexibility while the coverage is in force. If they have named a spouse as a revocable beneficiary and commenced divorce proceedings, they have the option to remove their spouse as a beneficiary. If that spouse was an irrevocable beneficiary, they would need their signature to remove them from the policy.
People may also choose to name their children as revocable beneficiaries for policies on themselves or their partners. Once the children become financially stable, if it plays into their legacy-building vision, they can remove their children as beneficiaries and instead choose to name a charity.
Revocable vs. irrevocable beneficiaries and policy changes
Irrevocable beneficiaries aren’t just fixed without their express consent. They also get a measure of control over the policy. In many states, the policy owner will need an irrevocable beneficiary’s written permission to adjust a policy’s death benefit or to terminate coverage, for example.
A revocable beneficiary, on the other hand, keeps the coverage’s full control in the hands of the policy owner. That individual can adjust or cancel coverage as they see fit without having to involve the beneficiaries. And they can add or remove a beneficiary as their needs or preferences change.