Understanding revocable vs. irrevocable beneficiaries in life insurance
Choosing beneficiaries on a life insurance policy may seem straightforward, but it can lead to major complications if not done with care. One of the most important distinctions you must understand is whether your beneficiaries are revocable or irrevocable. The designation you choose can affect your flexibility during your lifetime—and the distribution of death benefits after your passing. Missteps or ambiguity can lead to legal disputes, delayed payouts, or interpleader actions. With so much at stake, it’s crucial to understand the rules and get legal guidance when needed.
What is a life insurance beneficiary?
At its core, life insurance is a contract between the insured (also called the policyholder) and the insurance company. In exchange for premium payments, the insurer agrees to pay a death benefit to a named beneficiary upon the insured’s death. This beneficiary can be one or more people—or even an organization—designated to receive the funds.
However, who you name, and how you name them, matters more than many people realize. A vague or outdated designation can create confusion, especially in complex family situations, second marriages, or blended families. Some disputes arise not because of bad intentions, but because life circumstances changed—and the policy was never updated.
Revocable vs. irrevocable beneficiaries: what’s the difference?
When naming someone as a beneficiary, you can designate them as either revocable or irrevocable. A revocable beneficiary is someone you can remove or replace at any time, without their knowledge or permission. This option offers the most flexibility. For example, a young single person might name a sibling or parent as their beneficiary, then later change that designation to a spouse or child after marriage or the birth of a child.
By contrast, an irrevocable beneficiary cannot be changed without their written consent. Even if your personal circumstances change—such as a divorce or estrangement—you may be stuck with that beneficiary unless they agree to be removed. This lack of flexibility can cause serious complications later, which is why policyholders should only designate irrevocable beneficiaries when absolutely necessary.
Why would someone name an irrevocable beneficiary?
There are a few specific scenarios where irrevocable designations make sense—or are even required:
Divorce settlements: Courts often order one party to maintain life insurance with an ex-spouse or children as irrevocable beneficiaries to guarantee child support or alimony obligations.
Business partnerships: A partner may be named an irrevocable beneficiary in a buy-sell agreement, ensuring business continuity.
Trust planning: Some individuals want to guarantee that certain heirs, such as children from a prior marriage, cannot be disinherited.
Even though irrevocable designations can serve valid legal or financial purposes, they come with strings attached. In many states, irrevocable beneficiaries must consent not only to their removal but to any policy changes—such as reducing the death benefit or altering payment terms—that could affect their interest.
Primary and contingent beneficiaries: not just backup plans
In addition to revocable vs. irrevocable, life insurance policies also categorize beneficiaries as either primary or contingent. A primary beneficiary is first in line to receive the policy’s death benefit. A contingent beneficiary—sometimes called a secondary beneficiary—only receives the benefit if the primary beneficiary has passed away or is otherwise unable to claim it.
For example, if you name your spouse as the primary beneficiary and your children as contingent beneficiaries, the spouse would receive the full benefit unless they predecease you, in which case the children would inherit the proceeds. Without a contingent beneficiary, the payout could default to your estate—leading to probate complications or unintended distributions.
What happens if an irrevocable beneficiary dies before the insured?
If an irrevocable beneficiary dies before the policyholder, the situation can become complicated—especially if no contingent beneficiary is listed. In most cases, the death benefit will default to the estate unless the policy is updated to reflect a new beneficiary.
Relying on default rules is risky. If the proceeds are paid to the estate, they become subject to probate, estate taxes, and creditor claims. They may also be distributed according to a will—or worse, by state intestacy law if no valid will exists.
To avoid this, it’s vital to keep beneficiary designations current. If you have named an irrevocable beneficiary and they pass away, consult a life insurance attorney promptly to assess your legal options for updating the policy.
What if the beneficiary designation is unclear?
Conflicts often arise when a policyholder fails to clearly define their beneficiaries or when beneficiaries’ lives change after the policy is signed. Divorce, remarriage, estranged children, or vague terms like “my spouse” or “my children” can lead to legal disputes.
In such cases, insurers often file an interpleader action—a legal process where the insurance company asks the court to decide who should receive the payout. While this allows the insurer to avoid liability, it often delays the distribution of funds and forces the beneficiaries into litigation. Worse, it may divide families during an already painful time.
Avoiding unnecessary disputes and denials
To prevent these problems:
Regularly review and update your beneficiary designations
Avoid using ambiguous or generic terms like “spouse” or “family”
Name contingent beneficiaries, even if you think they’ll never be needed
Understand the consequences of naming someone irrevocably
Work with a lawyer when naming an ex-spouse or drafting divorce agreements involving life insurance
When disputes arise: how a life insurance attorney can help
If you’re involved in a disagreement over a life insurance policy—especially if the insurer has filed an interpleader or issued a claim denial—contact an experienced life insurance attorney. These legal disputes are often complex and emotionally charged. A knowledgeable attorney can review the policy language, investigate your legal rights, and fight for the payout you’re entitled to.
We’ve helped clients resolve disputes involving ex-spouses, stepchildren, outdated beneficiary designations, and confusing policy terms. If you’re uncertain about your rights as a beneficiary, or if a claim has already been denied, we offer free consultations and only charge fees if we recover benefits on your behalf.
FAQ: Life Insurance Beneficiary Designation and Disputes
Can I change a life insurance beneficiary after a divorce?
Yes—unless the beneficiary is irrevocable or protected by court order. Divorce alone doesn’t always remove a former spouse from your policy, so it’s important to review your designations after major life changes.
What’s the difference between a revocable and irrevocable beneficiary?
Revocable beneficiaries can be changed at any time by the policyholder. Irrevocable beneficiaries cannot be removed without their written consent.
What happens if the only named beneficiary dies first?
If no contingent beneficiary is listed and the primary beneficiary predeceases the policyholder, the death benefit may be paid to the policyholder’s estate, causing potential delays and probate complications.
Can I name multiple beneficiaries?
Yes. You can name multiple primary and/or contingent beneficiaries and specify the percentage of the benefit each should receive.
What is an interpleader, and how does it affect my claim?
An interpleader is a lawsuit filed by the insurance company when there’s uncertainty about who should receive the death benefit. The court will decide the rightful beneficiary. This process can delay payments and increase legal costs, which is why clarity in beneficiary designations is so important.