Shuman Roy is an entrepreneur, business owner, and musician. He started RoysNoys, LLC in 2013 as a music production and education service company. He also offers small business consulting and advisory services to help businesses get from start-up mode to turn-key operations. Shuman earned his M.B.A from the Stern School of Business in 2001 and has an undergraduate degree from Manhattan College in ...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Joel...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Dec 7, 2021

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The Truth in a Nutshell

  • The beneficiary gets the money from a life insurance claim
  • An irrevocable beneficiary is one that can’t be changed without their consent
  • Irrevocable beneficiaries are often children or businesses

Buying life insurance can be confusing. How does life insurance work, and who should be your beneficiary?

There are two different types of beneficiaries, and one option is an irrevocable beneficary. What should you choose? Learning more about life insurance companies that allow irrevocable beneficiaries will help you make the right choice, and we can help.

Before learning about life insurance companies that allow irrevocable beneficiaries, enter your ZIP code to get free life insurance quotes in your area.

What life insurance companies allow irrevocable beneficiaries?

There are three people involved in a life insurance policy. But what is a named insured, policyholder, and beneficiary?

The policyholder buys the policy, and the named insured is the person whose life is insured. These can be the same or different people.

A life insurance beneficiary is a person that will get the benefit from a life insurance policy when the insured passes away. The death benefit can be used for any purpose and is usually tax-free.

You can name as many beneficiaries as you want on your policy. The two types of beneficiaries are primary and contingent. Primary beneficiaries are first in line, and contingent beneficiaries get the money if the primary has also passed away.

The Insurance Information Institute provides tips for naming beneficiaries.

In addition to naming a beneficiary, you’ll need to name them as revocable or irrevocable. This will determine how easily the beneficiary can be changed.

A revocable beneficiary is the most common. The person can be primary or contingent, and the policyholder can change their status or payout at any time.

If a life insurance policy has an irrevocable beneficiary designation, the holder can’t change the beneficiary or payout without consent. If you have an irrevocable beneficiary, these rules apply:

  • You can’t remove the beneficiary without their consent
  • A policyholder can’t change their share of the death benefit without consent
  • They require notification if the policy owner cancels the policy

The most common irrevocable beneficiaries are the children of the named insured. Additionally, spouses are usually revocable beneficiaries in case the couple gets divorced.

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Why should you name an irrevocable beneficiary?

You might wonder why you would name an irrevocable beneficiary on your policy. In most cases, the beneficiaries should be revocable so you can make changes over time. However, there are situations in which an irrevocable beneficiary is necessary.

In addition to ensuring that a specific person receives your assets, some policies require an irrevocable beneficiary. Some of these policies include:

  • Key person policy
  • Irrevocable trust
  • Divorce agreements

Here is some more information on these policies.

Key Person Policy

Companies take out a key-person policy on an essential member of a business. The policy covers the company should an executive or another leader pass away, resulting in devastating losses for the business.

Typically, the business owns the policy and is the beneficiary. The funds help to hire a replacement and make up for any losses. As a result, the business is named as an irrevocable beneficiary to ensure that the death benefit goes to the organization.

Irrevocable Trust

Life insurance policies with higher death benefits might need an irrevocable trust to give the insured greater control over the funds. A trust allows the policyholder to add benefits and create life insurance beneficiary rules, like restricting money usage or paying out in installments over time.

An irrevocable trust can be the beneficiary. This choice ensures that the money goes directly into the trust when you die. This way, the trust will be used as you intended, such as paying for a child’s education.

Divorce Agreements

If a couple buys a life insurance policy and jointly pays into it, a divorce agreement might name both people irrevocable beneficiaries. However, this will depend on state law and your divorce decree.

The court might determine that the policy’s beneficiary must be the other partner. Naming both parties as irrevocable beneficiaries will ensure that the death benefit goes to the other party, regardless of what the other attempts to do to change the policy terms.

In addition, the court might require a life insurance policy that names children or a trust for those children as the beneficiary.

What are the pros and cons of irrevocable beneficiaries?

There are pros and cons to naming irrevocable beneficiaries. Knowing these impacts and how they might affect you will help you decide if this is the right choice for your life insurance policy.

The primary benefit is that it’s difficult to change during your life and nearly impossible to change after your death. This status is most helpful if you have multiple marriages or a blended family.

A stepparent or guardian will be unable to cut off children from previous marriages. Also, the won’t be able to challenge the policy after your death. The payout will go to the people you chose and can’t be changed.

A drawback of an irrevocable beneficiary is its inflexibility. Since can’t make any changes without the beneficiary’s consent, you need to make sure you won’t regret your decision.

Another pitfall is the loss of control of your assets to a trustee. If you need access to the policy’s funds due to an emergency, you’ll need permission from another person.

The naming of a beneficiary is strictly about who will receive the money and has nothing to do with life insurance rates.

There are some life insurance companies that don’t allow irrevocable beneficiaries. Therefore, if you need one, you should shop around.

How often should you review your life insurance policy and beneficiaries?

As previously mentioned, the beneficiary is the only person who has the right to change an irrevocable beneficiary. So you might not need to review your policy.

However, most life insurance policies should be reviewed annually or following any major life events. These events include:

  • Marriage
  • Divorce
  • Birth of a child
  • Death

Since you can’t remove irrevocable beneficiaries, they’ll always be primary beneficiaries. Therefore, if you name irrevocable beneficiaries in your policy, any revocable beneficiaries will always be secondary.

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Life Insurance Companies That Allow Irrevocable Beneficiaries: The Bottom Line

Revocable beneficiaries are the most common. However, your policy might also require an irrevocable beneficiary. Knowing about life insurance companies that allow irrevocable beneficiaries will help you decide between the two.

Now that you know about life insurance companies that allow irrevocable beneficiaries enter your ZIP code to find free life insurance rates in your area.