What Is a Revocable Beneficiary?

A revocable beneficiary is the beneficiary of a life insurance policy that can be changed at will by the policy owner, without the need to obtain the permission of that beneficiary. Most types of life insurance policies provide this type of arrangement, allowing the owner to change beneficiaries when and as events occur that make the change necessary. The owner can also choose to terminate the policy and all its benefits without having to obtain the permission from the revocable beneficiary.

One of the benefits of a revocable beneficiary arrangement is that the policy owner is free to make changes to how benefits from the life insurance policy are disbursed after his or her death. When and as events occur that have some impact on who should receive the benefits, the process of making a change requires little more than notifying the insurance provider using whatever procedure that provider requires. For example, if the revocable beneficiary is the insured party’s spouse and a divorce should take place, the party can change the beneficiary from the spouse to a child, a sibling or some other loved one with very little effort. Since there is no requirement to obtain permission or even notify the revocable beneficiary of the change, the process can be accomplished quickly and easily.

Another advantage to a revocable beneficiary arrangement is that there is no need for the policy owner to notify the beneficiary in the event that the plan is canceled or terminated. This also helps to simplify the arrangement, especially in situations that involve the cancellation of the policy due to non-payment or the fact that the policy owner has chosen to roll the plan into a different policy. The beneficiary does not have to be involved in any of the activities regarding the changes to the status of the life insurance policy.

Most individual life insurance plans are structured to allow for a revocable beneficiary. Insurance plans that are related to business deals may or my not follow this same approach. In some cases, irrevocable beneficiaries are required when investors choose to provide funds for start-up businesses, making it possible to recoup losses in the event that the business owner should pass away suddenly. Businesses sometimes also provide irrevocable life insurance plans for certain members of the executive team, making it possible to have funds that help to offset the expenses of replacing a key member of that team in the event of a sudden death.