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What is a revocable beneficiary in life insurance?
When it comes to life insurance, one of the key details of a policy is the beneficiary designations. More specifically, whether a beneficiary is primary or contingent and revocable or irrevocable. If you've ever looked closely at a policy, you might have noticed these terms and wondered, what exactly do they mean?
There are two main types of beneficiaries, primary and contingent, and these can be further specified as revocable and irrevocable. In this article, we'll mostly focus on the revocable beneficiary designation. That said, to get us started, we need to gain an understanding of what a primary and contingent beneficiary are.
What are the main types of beneficiaries?
Primary beneficiary: The first individual or entity in line to receive the insurance benefit should the insured person pass away.
Contingent beneficiary: The individual or entity named by the policy owner to receive the policy’s life insurance benefit if the primary beneficiaries are not alive at the time of the insured’s person’s death.
Note: There can be multiple primary and contingent beneficiaries.
Examples of an entity includes charities, churches, businesses, or institutes of higher learning.
These two main types of beneficiaries can be further specified as revocable and irrevocable beneficiaries.
What is a revocable beneficiary?
A Revocable beneficiary: When a beneficiary is designated as a revocable beneficiary, that beneficiary designation can be changed at any time on the policy by the policy owner. This means you, as the policy owner, have complete authority to make changes to beneficiary designations when all beneficiaries are listed as revocable. Thus, naming a revocable beneficiary can be a more flexible option on your life insurance policy.
To update your designated (specially chosen and clearly listed in your policy) beneficiary you need to complete and submit a life insurance beneficiary change form from your carrier.
What is an irrevocable beneficiary?
Irrevocable beneficiary: When a beneficiary is designated as an irrevocable beneficiary, the beneficiary's designation cannot be changed by the policy owner without the beneficiary's consent.
There are instances where naming someone an irrevocable beneficiary may make sense for your life circumstances as it can provide:
- Greater payout protection
- More financial security for your beneficiaries
- Support for a clear and stable inheritance plan
- A way to prevent last-minute changes
Who has the right to change a revocable beneficiary?
If a beneficiary is designated as a revocable beneficiary, the policy owner has authority to make changes to the designation without the beneficiary's consent. A beneficiary change could be part of an insurance policy or estate plan review.
Some life events when you might want to consider changing your designated beneficiary:
- Marriage
- New child
- Divorce
- Death of the beneficiary
The benefits of naming a revocable beneficiary
Control and flexibility: As the policy owner, you have total control over the insurance policy, which means you can make any change you want to the policy without obtaining the beneficiary's consent.
This allows you to make adjustments to a revocable beneficiary due to a major life event (marriage, new child, divorce, death of the beneficiary). That said, you may want to notify the revocable beneficiary if you remove them.
Note: If you don't specify a revocable or irrevocable beneficiary on your life insurance policy, the beneficiary will automatically be designated as revocable. However, in Quebec, one's spouse is automatically deemed as an irrevocable beneficiary (unless specifically designated otherwise).
Protecting assets: Because you have control of the life insurance policy proceeds, you can redirect the life insurance death benefit (by changing the revocable beneficiary) if the named revocable beneficiary is unfit or unable to receive the death benefit.
Speedier distribution: With a specifically chosen and clearly listed revocable beneficiary in your policy, the life insurance death benefit can be distributed directly and quickly to the intended recipient.
Maintains privacy: Life insurance beneficiary designations are private, so there's no public record of who receives the life insurance death benefit.
How do you name a revocable beneficiary?
- Research your life insurance options.
- Get a quote and apply for coverage.
- Review your insurance policy.
- At the time of application, list your primary and contingent beneficiaries. In most cases, the beneficiary designations are automatically revocable. You may need to submit a beneficiary change form alongside your application if you wish to name an irrevocable beneficiary. That said, as mentioned above, in Quebec one's spouse is automatically deemed as an irrevocable beneficiary (unless specifically designated otherwise).
- Next, complete and submit your application.
- Remember to review your insurance policy on a regular basis to make sure your beneficiary information is current.
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TD Term Life Insurance plans and TD Guaranteed Acceptance Life Insurance are individual life insurance plans underwritten by TD Life Insurance Company. Some restrictions may apply. Application subject to approval. See Insurance Policy(ies) for coverage details, including limitations and exclusions.
The content on this page is for general information purposes only and does not constitute legal, financial or insurance advice. Speak to a TD Life Insurance licensed professional advisor regarding your specific situation. The information contained herein, is subject to change without notice.