Rhode Island Life Insurance Practice Exam

What type of beneficiary designation should a policyowner choose to make a permanent change to the beneficiary on a Life insurance policy?

1. Contingent

2. Revocable

3. Irrevocable

4. Multiple Beneficiaries

The correct answer is: Irrevocable

Choosing an irrevocable beneficiary designation is the appropriate option for a policyowner who wants to make a permanent change to the beneficiary of a life insurance policy. When a beneficiary is designated as irrevocable, it means that the policyowner cannot change or remove this beneficiary without their consent. This ensures that the designated beneficiary has a guaranteed right to the death benefit, thus providing a layer of protection. In contrast, a revocable beneficiary designation allows the policyowner to modify or revoke the beneficiary at any time without needing approval from the beneficiary. This flexibility makes revocable designations suitable for situations where a policyowner may want to change the beneficiary as their circumstances evolve. Contingent beneficiaries are secondary beneficiaries who will receive the benefits only if the primary beneficiary has passed away or cannot be located. This designation does not constitute a permanent change to the primary beneficiary and is dependent on the status of the primary. Multiple beneficiaries refers to the situation where more than one individual is named to receive the death benefit. While this can provide options for distribution, it does not inherently address the permanence of a beneficiary change. Thus, selecting an irrevocable beneficiary designation effectively creates a lasting and unchangeable relationship between the policyowner and the beneficiary, fulfilling the requirement for making a permanent change.