Life insurance is a popular choice for those who want to make sure their loved ones are taken care of after they die. You can choose your beneficiary or beneficiaries when you buy life insurance policies. There are often rules regarding who will receive your death benefit, and what type of access they can have to the payout.
What is life insurance beneficiary?
If you die, your life insurance beneficiary will be the person or organization that receives the money. You can use the money for any purpose, and it is often exempt from tax. The beneficiary can be any person, but some people prefer to name a non-profit or church as the main beneficiary.
You have the option of naming two or more beneficiaries on your life insurance policy when you purchase it. For example, a spouse or a child could be named as a beneficiary. A contingent beneficiary can be added to your policy. This would allow you to receive your death benefit in the event that the primary beneficiary dies before you can claim it.
Understanding an irrevocable beneficiary
There are two main types of beneficiaries–irrevocable and revocable. An irrevocable beneficiary is someone with full rights to your life insurance policy funds. An irrevocable beneficiary is someone who can receive the death benefit regardless of whether you change the beneficiary of your policy.
You can only remove an irrevocable beneficiary from your insurance policy if they agree to forfeit all rights to the money. This is often a complicated situation because it often requires lawyers to remove an irrevocable beneficiary. This is more complicated than simply contacting your insurance company to add a beneficiary to your policy statement.
Because it guarantees that they will have access to the money, children are often named as irrevocable beneficiary on their parents’ life insurance policies. It can get complicated when there is a marriage involved. If you name your spouse an irrevocable beneficiary, but they divorce years later, they still have legal rights to the money, unless they agree to be taken out.
Sometimes irrevocable beneficiaries may be able to change your life insurance policy. However, it all depends on the state. To cancel your life insurance policy so that your ex-spouse does not have access your death benefit, they may need to approve it.
Revocable beneficiaries
You can see them as being opposites when comparing irrevocable beneficiaries and revocable beneficiaries. Revocable beneficiaries are people who do not have full access the funds in your life insurance policy. They can be removed from your policy at anytime, for any reason. They cannot also access your policy or make any changes.
Is it possible to have an irrevocable beneficiary?
Many people name an irrevocable beneficiary to their life insurance policy for security. If your spouse has a demanding job but stays home most of the time with your children, you might name them as an irrevocable beneficiary. This will ensure that your family is able to access your life insurance funds in case you die.
Many people add their children to their life insurance policies as irrevocable beneficiaries. The children have full access to the money regardless of what happens in your life. If you divorce or remarry, your children will be irrevocable beneficiaries. This means that your spouse can’t claim the money, change your policy, or attempt to claim it after your death.
Questions frequently asked
How often should I review my beneficiaries’ records?
People often change the beneficiary of their life insurance policy to reflect their changing lives. Insurance companies recommend reviewing your beneficiaries at least once a year. It is a good idea for insurance companies to review your beneficiaries once a year in the event of a significant life change, such as a divorce or marriage. Your life insurance premium will not be affected by adding beneficiaries to your policy.
What happens if my irrevocable beneficiaries are my spouse and I divorce?
You might find yourself in a difficult spot if your ex-spouse is an irrevocable beneficiaries after you divorce. They can be removed from your policy if they consent to lose their right to the money. They will legally still have access to your death benefits and, depending on your location, may be able make changes to your policy because of irrevocable beneficiary rights.
Which is the best life-insurance company?
Everybody is unique in their search for the best-insured life insurance company. It all depends on what type of policy you choose, how much coverage is needed, your age, overall health, and your budget. Some of the best providers are Prudential Financial and MetLife. Haven, MassMutual and Haven offer great customer service and financial stability.
