Rhode Island Life Insurance Practice Exam

What type of beneficiary designation allows M to change the beneficiary at any time?

1. Irrevocable

2. Revocable

3. Contingent

4. Primary

The correct answer is: Revocable

The designation that permits M to change the beneficiary at any time is the revocable beneficiary designation. This type of designation grants the policyholder complete control over the policy and its beneficiaries. As a result, M can update the beneficiary information as circumstances in their life change, such as through marriage, divorce, or the birth of a child. In contrast, an irrevocable beneficiary designation would lock the policyholder into the initial choice of beneficiary, requiring the policyholder to obtain consent from the designated beneficiary for any future changes. This limits flexibility significantly. Contingent beneficiaries are those who would receive the benefits only if the primary beneficiary is unable to claim them, but this designation does not pertain to M's ability to change the primary beneficiary who is currently designated. The primary beneficiary simply refers to the first person or entity designated to receive the death benefit upon the policyholder’s passing, but it does not specify whether this designation is revocable or irrevocable. Thus, while it denotes order of preference for payment, it does not inherently provide flexibility to change the beneficiary at will.