What are the differences between a primary, contingent, revocable and irrevocable beneficiary?

UPDATED: May 7, 2012

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UPDATED: May 7, 2012Fact Checked

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Asked May 7, 2012

1 Answer

The beneficiary on a life insurance policy is the person or persons who receive the settlement when the policy matures. There are a few different types of beneficiaries, and each one has its own rights and limitations. The four most common beneficiary types are Primary, Contingent, Revocable and Irrevocable, and those terms are important for anyone with a life insurance policy.

Primary Beneficiary

This is the actual named beneficiary of the policy. Unless the policy owner changes the beneficiary, or the primary beneficiary is deceased before the life insurance policy owner that is the person or group of people who will receive the settlement. If the primary beneficiary is deceased when the policy matures, then the settlement would fall to the secondary beneficiary, usually called the contingent beneficiary.

Contingent Beneficiary

The contingent beneficiary is the next person or group of people in line if the primary beneficiary is not available. As with the primary, multiple contingent beneficiaries can be named, either individually or as a group, such as "my grandchildren." It should, however, be noted that specifying names can eliminate later disputes which could complicate the settlement.

Revocable Beneficiary

The owner of the policy is the person who is paying for the coverage. The owner has the option of changing revocable beneficiaries at will, such as removing the primary beneficiary, or adding to the list of contingent beneficiaries. Since the beneficiaries are revocable, they do not have any say in who the owner can name or how often changes can be made.

Irrevocable Beneficiary

An irrevocable beneficiary is sometimes thought of as a co-owner of the policy. The owner still maintains the policy and has the option of making changes, but changes must be approved by any irrevocable beneficiaries named in the contract. In some states, this requirement is limited to changing beneficiaries, but other states interpret an irrevocable beneficiary as being entitled to a say in any changes made to the policy, including borrowing against the cash value and early termination.

Answered May 7, 2012 by Anonymous

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