Question 70

A policyowner’s right to change beneficiaries is limited when the beneficiary is designated as irrevocable.

When a beneficiary is designated as irrevocable, the policyowner cannot change the beneficiary without the consent of that beneficiary. This restriction ensures that the irrevocable beneficiary's rights are protected.

A) Irrevocable

This option is correct because an irrevocable beneficiary has a vested interest in the policy, which prevents the policyowner from altering the beneficiary designation without permission. This legal binding nature ensures that the beneficiary will receive the policy proceeds, thereby limiting the policyowner's flexibility.

B) Contingent

A contingent beneficiary is one who will receive the policy benefits only if the primary beneficiary is unable to do so. This designation does not limit the policyowner's rights to change the primary beneficiary, making this option incorrect.

C) Primary

The primary beneficiary is the first in line to receive the death benefit from the policy. The policyowner retains full rights to change the primary beneficiary designation, thus this option does not restrict the policyowner's ability to make changes.

D) Revocable

A revocable beneficiary can be changed by the policyowner at any time without needing consent from the beneficiary. This flexibility means that this option does not impose any limitations on the policyowner's rights, making it incorrect in this context.

Conclusion

The designation of a beneficiary as irrevocable is the only option that imposes a limitation on the policyowner's right to change beneficiaries. All other options—contingent, primary, and revocable—allow for changes without restriction, confirming that only an irrevocable designation secures the beneficiary's interests in a binding manner.