What Is An Irrevocable Beneficiary?

Irrevocable beneficiary

A life insurance policy helps protect the financial well-being of the people you love. Most people buy life insurance to cover expenses for close family members. These family members are beneficiaries and receive the proceeds of the policy. Beneficiaries can be revocable or irrevocable. An irrevocable beneficiary is near impossible to change once put into place.

So, how do you determine if you should choose which type of beneficiaries to assign? Let’s take a closer look at life insurance beneficiaries and why you may or may not want an irrevocable one.

What is a beneficiary?

A beneficiary is a person you wish to receive the money paid out by your life insurance policy. If you pass away, this person gets the death benefit of your policy.

For example, you have a million-dollar life insurance policy. You name your spouse as the beneficiary. When you pass away, your insurance company awards a million dollars to them.

Can I name more than one beneficiary?

Yes! Beneficiaries aren’t limited to one person. Someone with multiple children will likely want to list each child. You can also name an entity, such as a charity.

Some people set up trusts for their estate and name the trustee as a beneficiary. Life insurance policies without a named beneficiary go to your estate.

You also decide if the beneficiary is revocable or irrevocable. This choice determines how easy it is to change them in the future.

Revocable beneficiary meaning

The policy owner can change a revocable beneficiary. That’s why most life insurance beneficiaries are revocable. Using a revocable beneficiary means you’ll be able to change your policy as your life changes.

For example, you have two children when you take out your policy. Years later, you have another child. Your first two children are revocable beneficiaries. You’ll be able to add your third child to the policy as another beneficiary. This is usually done in a simple form.

Irrevocable beneficiary meaning

An irrevocable beneficiary is the opposite of a revocable one. When you list an irrevocable beneficiary, you’re giving up your right to make changes. They aren’t designed to change — even if your situation does.

Let’s look at the example we used for revocable beneficiaries. If your children were irrevocable beneficiaries, it would be almost impossible to add your third child to the policy.

When should you choose an irrevocable beneficiary?

If it’s so hard to change irrevocable beneficiaries, why does anyone use them? There are times when a person is sure about their choice. By naming an irrevocable beneficiary, your plans can’t change.

Business owners might list their business partners on a business-owned policy. Or, a parent with a special needs child may want to ensure their financial future.

The biggest thing to remember is that you won’t be able to change your beneficiary. That means you can’t add a new one or adjust how much each receives. You need to be sure it’s right for your situation and that it won’t change in the future.

Should my spouse be my irrevocable beneficiary?

Spouses generally shouldn’t be irrevocable. Sometimes “till death do us part” doesn’t work out. Say you named your spouse as irrevocable and then got divorced.

Now, your ex-spouse would receive the death benefit, regardless of your current relationship. So, you may not want to list them this way in your estate plan.

Examples of irrevocable beneficiaries

There are a few times where irrevocable beneficiaries make sense. Let’s take a closer look at these situations.


Life insurance is an important tool for protecting your children’s future. Many people decide to name their children as irrevocable beneficiaries. Of course, there’s always the chance the relationship could sour. However, many parents consider it their duty to protect their children no matter what.

Naming children as irrevocable can also protect them if you marry someone new. Your new spouse won’t be able to claim the benefits or change your policy if you pass away. You can be sure the money will go directly to your children.

Key man insurance

Business owners have a lot of financial considerations. A big one is what happens if a key employee passes away. For example, your business partner is in charge of product design. If they pass away, you’ll be without their knowledge or expertise. Your business may not be able to continue without them.

To combat this, many businesses use “key man” policies to protect against the loss of knowledge or skills if a partner dies. This is a policy taken out by the business on the life of the key person. The business is the irrevocable beneficiary.

If the key person passes away, the business receives the death benefit. This financial compensation can help the business stay afloat.

Irrevocable life insurance trusts

An irrevocable trust gives you more control of where your finances go after death. You can create rules about when and where your money goes from the trust. Parents might use a trust to give funds to children at certain ages. This prevents a young child from receiving a large death benefit all at once.

You can name your trust as your irrevocable life insurance beneficiary. This means your life insurance proceeds are sure to go to the trust. The instructions within the trust then direct the trustee where to send the money.

Collateral assignment

Some loans let you use life insurance as collateral. To do this, your lender is the irrevocable beneficiary of a life insurance policy. The insurance proceeds cover your outstanding debt if you die before paying it off. If you pay off the loan during your life, the policy dissolves.

Advantages and disadvantages of irrevocable beneficiaries

There are pros and cons to using irrevocable life insurance beneficiaries. So understanding the advantages and disadvantages will help you decide which type to use.

Advantages of irrevocable beneficiaries

An irrevocable life insurance beneficiary gives the policy owner peace of mind. You’ll know exactly where your death benefit is going after you die. Having this peace of mind can be invaluable if you’re a parent or caregiver.

They also help protect loved ones from changing family dynamics. Remarriage, for example, could complicate your children’s claims to your finances. An irrevocable designation guarantees life insurance money goes to your children.

Disadvantages of irrevocable beneficiaries

The biggest disadvantage is the difficulty to change them. Not being able to update your beneficiaries can cause problems as your life changes.

Naming a spouse, for example, could be difficult if your marriage doesn’t work out. Even if you remarry, your ex-spouse has the claim to your life insurance benefits.

Can I change an irrevocable beneficiary?

There is a way to change an irrevocable beneficiary. However, it’s difficult. After all, an irrevocable designation isn’t meant to be changed. Your beneficiary has to agree to the changes. This includes adding new beneficiaries to the policy.

Some states have extra restrictions for these policies. You may have to get your beneficiary’s approval before changing the policy. Be sure to check your state’s regulations before naming beneficiaries.

You can only change irrevocable beneficiaries with their consent. Your beneficiary will have to voluntarily give up their status.

How often should I review my beneficiaries?

It’s important to regularly review your life insurance policies — including beneficiary designations. A good rule of thumb is to look over your policies at any major life event, such as:

What’s the difference between a primary beneficiary and an irrevocable beneficiary?

A primary beneficiary is the main beneficiary of a life insurance policy. A contingent beneficiary is a secondary one. The contingent beneficiary only receives funds if the primary beneficiary can’t.

For example, a primary beneficiary passes away before the policy owner. The policy owner forgets to update the beneficiaries. The contingent beneficiary gets the death benefit when the owner dies.

Primary and contingent beneficiaries tell life insurance companies who should get the proceeds. Irrevocable and revocable designations determine if you can change a beneficiary. An irrevocable beneficiary will always be a primary beneficiary.

How do I designate an irrevocable beneficiary?

You designate beneficiaries when you first take out a life insurance policy. Most applications have a section for listing them. You will likely need their names, addresses, and Social Security numbers.

This is where you will usually choose irrevocable or revocable. Most people choose a revocable beneficiary when taking out a policy. This lets you make changes to your beneficiaries as needed.

Be cautious if you choose an irrevocable beneficiary!

Now you know what the irrevocable beneficiary meaning is, and the seriousness of it. Your life insurance beneficiary is the person or entity who gets your death benefit. Irrevocable beneficiaries are designed to be permanent. They’re nearly impossible to change. Most policies require permission from the beneficiary to make changes.

Are you thinking of using an irrevocable beneficiary? Be sure to talk with an estate planning attorney or other trusted advisor first. They’ll help you decide if it makes sense for your policy.

The post What Is An Irrevocable Beneficiary? appeared first on Clever Girl Finance.

Do You Really Need A Million Dollar Life Insurance Policy?

Million dollar life insurance policy

For many of us, the idea of having a million dollars is hard to grasp — it just seems too big to be real. Would that million dollars be enough to cover your family’s expenses if you passed away? A million dollar life insurance policy might seem like more than enough coverage but is it?

Million-dollar policies are often touted as the best option for everyone. However, you might find that it’s far too much or too little for your unique financial situation. This article will help you decide if a million-dollar plan is right for you.

What is a million dollar life insurance policy?

Getting life insurance is an important step in securing your financial future. You can define a life insurance policy by its death benefit.

A death benefit is the amount your beneficiaries receive at your death. A million dollar life insurance policy is simply any policy with a death benefit of $1,000,000.

Types of life insurance

A 1 million dollar life insurance policy isn’t limited to a certain type of life insurance. There are several types of life insurance to choose from. They’re generally divided into two groups:

  • Term insurance
  • Permanent insurance

Term Insurance

A term life insurance policy covers you for a set number of years, known as the policy’s term. The most common terms are 10 years, 20 years, or 30 years.

Term policies make for straightforward life insurance. You pick the death benefit and length of the policy. As long as you pay the premiums each month, you’re covered until the term runs out.

At the end of the term, your policy expires and you’re no longer covered. Term life insurance is a popular choice.

According to 2020 data from the American Council of Life Insurers (ACLI), 4.2 million new individual life insurance policies were term insurance.

These plans made up 41% of new individual policies. Some reasons people choose term life over permanent policies include:

  • Term policies are less expensive than permanent life insurance.
  • Length of term and death benefit are customizable to fit your needs.
  • You can renew or convert your policy when the term expires.
  • Your premiums stay level or increase at specific intervals, such as every five years.

Permanent Insurance

A permanent life insurance policy stays in effect your entire life, so long as you pay your premiums. Permanent policies also involve a savings component, known as cash value. Part of your premium goes into a dedicated cash value account.

This money earns interest and some cash value accounts let you invest the funds. You can use your cash value to pay your life insurance premiums from the cash you’ve saved up in the account. Permanent life insurance gives you benefits like:

  • Earns cash value over time.
  • Lifelong coverage, so long as you pay your premium.
  • Guaranteed coverage regardless of changes to your health.
  • Your premiums are set and won’t increase over the life of the policy.

How much does a million dollar life insurance policy cost?

So, how much does a million dollar life insurance policy cost? Well, it depends. Higher death benefits usually mean higher premiums.

Other factors can also play a role in your total costs. Despite having the same death benefit, the cost of 1,000,000 life insurance can vary a lot. If you’re considering 1,000,000 life insurance, consider all the factors that affect costs.

What factors affect the cost of life insurance?

Insurance companies check several risk factors to determine your costs. They’re looking to cut the cost of insuring a large group of people.

People who are young and healthy are at a lower risk. It shouldn’t surprise you that your health is the most important factor.

This includes common health-related factors like your age, gender, weight, and medical history. Other factors play a role in a million dollar life insurance policy cost as well, including:

  • Length of term
  • Type of insurance
  • Driving record
  • Nicotine use
  • High-risk hobbies
  • Family medical history
  • Dangerous occupations

Length of Term

If you decide a term 1 million dollar life insurance policy is right for you, your costs change based on how long you want your policy to be active. Longer terms often cost more.

Type of Insurance

The type of life insurance policy you choose will change the cost of your premiums. Permanent life insurance has higher premiums than term policies.

Driving Record

Many insurers will look at your driving history. Drivers with fewer accidents or traffic tickets are less risky to insurance providers. Safe drivers with clean driving records are less likely to be in a fatal accident.

Nicotine Use

According to the CDC, smokers have a life expectancy that’s at least 10 years shorter than non-smokers. Insurance providers take this into account when approving a life insurance policy.

Tobacco users often have to pay higher premiums for coverage. Long-term nicotine users could have trouble finding a policy at all.

High-Risk Hobbies

The things you enjoy doing on your time off could increase your life insurance costs. People who engage in high-risk activities usually pay more for life insurance. So be prepared for increased costs if you enjoy mountain climbing or skydiving.

Family Medical History

Your family medical history could increase your insurance costs, regardless of your health. Insurance companies look for hereditary diseases or conditions when reviewing your insurance application.

Dangerous Occupations

Like risky hobbies, a dangerous profession could lead to higher insurance premiums. Some lines of work are more dangerous than others.

Life insurance companies take this into account when deciding your insurance costs. Dangerous occupations include electric line installation, police work, and mining.

Who should get a million dollar life insurance policy?

The right amount of life insurance is different for everyone. That’s especially true when considering higher death benefit amounts. Not everyone needs a million dollars in coverage.

Life events, like getting married or buying a house, can change your financial needs. Likewise, you may need more coverage if you earn a significant salary. For example, people who need a 1000000 life insurance policy might include:

Who qualifies for a million dollar life insurance policy?

Not everyone qualifies for a 1 million dollar life insurance policy. Life insurance replaces your income to cover your loved one’s financial needs when you pass.

To qualify for a larger death benefit, you have to justify why you need more coverage. Life insurance companies use your current salary, age, and health to determine your eligibility.

Some insurers will approve a death benefit that’s up to 30 times your annual salary. In that case, you’d need to make about $34,000 per year to be eligible.

Your age is also a factor in approval for a 1 million dollar life insurance policy. Younger people tend to qualify for larger death benefits. Someone young is less likely to need their life insurance benefits anytime soon.

Finally, your current health — and medical history — will affect your approval odds. If you’re healthy, you’re more likely to get approved for a million dollar policy. Most high-dollar policies require a medical exam before approving your application.

How to decide if a million dollar life insurance policy is right for you

It can certainly feel like more is better when it comes to life insurance, but that’s not always the case. Life insurance benefits should replace your income and cover debts if you pass away.

If your earning potential and debts are less than $1 million, you might not need that much coverage. On the other hand, a million dollars can sound like a lot, but it may not be enough.

It might surprise you to learn how many expenses your family faces. Weigh your potential expenses with the cost of premiums for a million-dollar policy. You want to find a balance between enough coverage and affordable cost.

How to calculate your life insurance needs

The simplest way to decide how much life insurance you need is to multiply your annual income by 10-30.

Of course, this method doesn’t go into detail. It can, however, be a great place to start when deciding how much life insurance to buy.

Once you have a loose idea of how much insurance you need, you can start factoring in your individual needs.

Add up the estimated cost of each obligation to get a more precise idea of your insurance needs. Some factors to consider include:

Using a life insurance calculator

Looking for an easier way to calculate your life insurance needs? Modern technology makes it a lot easier to find the right amount of coverage. You can use online life insurance calculators to quickly estimate your needs.

An easy-to-use calculator is this one from Life Happens. This nonprofit’s mission is to help families make smart insurance choices.

How to shop for a million dollar life insurance policy

Shopping for a 1 million dollar life insurance policy is much like shopping for any type of life insurance. You should plan to shop around for the best fit before committing to a plan.

Comparing policies and insurance providers gives you a better chance to get a policy that’s right for you. You could also end up saving money by shopping around.

What to look for when shopping for a million dollar life insurance policy

Million-dollar plans are usually more expensive than those with lower death benefits. Be diligent when shopping to find a policy — and insurance provider — that serves your needs. Look for these things when comparing policies:

  • Good provider rating
  • Premium costs
  • Medical exam requirements
  • Renewability or convertibility
  • Optional riders

Provider Ratings

Picking a good life insurance company is an important part of shopping for life insurance. There are several ratings you can use to help you decide if a company is a good fit.

Start by reading reviews of the company to see what current or previous customers have to say. You can also look at the Better Business Bureau to see recent complaints against the company.

The financial security of the company should also be a big priority. After all, you want to know your insurer can pay your claim, especially if it’s a higher amount like a million dollars. You can look up financial strength ratings from independent agencies.


The cost of life insurance is always going to be a big factor in the policy you choose. While you shouldn’t base your whole decision on cost alone, you also don’t want to overpay for coverage.

Collect life insurance quotes for similar policies from multiple providers. Comparing quotes lets you find the best combination of coverage and cost savings.


While term insurance policies expire once the term is up, many are renewable. A renewable policy means you can renew the same policy for a new term.

One big benefit is you won’t have to take another medical exam, which could be helpful if your health has declined.

Another term insurance option is a convertible term policy. These policies let you convert your policy into permanent life insurance at the end of the term.

This can be a great way to get affordable coverage when you’re younger and guarantee coverage when you’re older.

Optional Riders

Life insurance policies often let you add optional coverage, called riders. A rider is an extra benefit for your policy. A common option is an accelerated death benefit (ABD) rider.

This lets you access your death benefit while you’re still alive. For example, you can use ADB coverage to help pay for treatment of a chronic or terminal illness, like cancer.

Determine if a million dollar life insurance policy is right for you

Choosing the right life insurance policy for your needs is a very personal decision. There’s no one-size-fits-all answer to protecting your loved ones’ financial future.

You can find the best fit for your family by taking the time to research potential policies. Be sure to ask insurance agents about the details of a 1,000,000 life insurance policy you’re thinking of buying.

The post Do You Really Need A Million Dollar Life Insurance Policy? appeared first on Clever Girl Finance.