4.6.5 Changing Beneficiaries
There are two ways of recording beneficiaries.
- Revocable
- Irrevocable
Revocable Beneficiaries
Most policies are revocable, which means the policyowner can change the beneficiary at any time without having to acquire the existing beneficiary's permission.
Irrevocable Beneficiaries
The irrevocable designation means that the beneficiary cannot be changed without the existing beneficiary's permission. The policyowner has relinquished all rights - not only the right to change the beneficiary, but also the right to policy loans, including automatic premium loans. The beneficiary must provide written permission for the changes to take place. An example of a situation in which an irrevocable beneficiary designation is desired may be through a divorce as part of the settlement.
Irrevocable clauses can be absolute or reversionary.
Absolute - If absolute, the beneficiary has an unquestionable (absolute) vested interest in the life insurance contract even if the beneficiary does not survive the policyowner.
Reversionary - Reversionary gives the right to modify the beneficiary clause, and all other rights revert back to the policyowner if the beneficiary predeceases the policyowner.
Recording Method
The recording method is most commonly used in changing beneficiaries. This is the procedure wherein the policyowner notifies the insurance company in writing of the intention to change the beneficiary. The insurer records the change as of the date of first properly delivered notification by the policyowner. The effective date of the change to the policy is the date the policyowner signed and dated the notice.
