Beneficiary choice changes policy control

What the lesson covers

1. 01

   The client

   Raj owns a life insurance policy on his own life, and he wants to name his wife, Meena, as the beneficiary. The form asks: revocable, or irrevocable? Irrevocable sounds more secure, so he leans that way. But Raj also plans to borrow against the policy for his business in a few years, and that choice will affect him.

2. 02

   Two choices

   A revocable designation lets the owner change the beneficiary at any time, without consent. The beneficiary has only an expectation. An irrevocable designation gives the beneficiary a vested interest in the policy. From then on, the owner needs the beneficiary’s consent to change the designation, assign the policy, surrender it, or borrow against it.

3. 03

   Raj’s plan

   So if Raj names Meena irrevocably, his future policy loan will need her consent. The advisor’s job is to explain that trade-off before he signs, not to pick whichever word sounds strongest. These are the common-law rules. Quebec’s civil law works differently, so always use the jurisdiction the question names.

4. 04

   Exam move

   Here is how the exam asks it. The beneficiary can change it? No. Only the owner can, with the beneficiary’s consent. The owner keeps full control? No. Control is restricted. It ends automatically at divorce? No, it does not. The owner cannot change it, assign, surrender or borrow without the beneficiary’s consent. That is the answer.

5. 05

   Takeaway

   Revocable: the owner changes it at will. Irrevocable: consent is needed for changes, assignments, surrenders and loans. Separate who should receive the money from how much control the owner wants to keep.