West Virginia State Life Insurance Practice Exam

A policy owner's rights are limited under which beneficiary designation?

1. Revocable

2. Irrevocable

3. Contingent

4. Primary

The correct answer is: Irrevocable

The correct choice is that a policy owner's rights are limited under an irrevocable beneficiary designation. When a beneficiary is designated as irrevocable, the policy owner cannot change the beneficiary without the consent of the irrevocable beneficiary. This means that the policy owner must seek permission from the irrevocable beneficiary if they wish to make any changes, such as transferring the beneficiary designation to someone else, borrowing against the policy, or cashing it out. The irrevocable designation serves to protect the beneficiary's rights, ensuring that they are entitled to the policy benefits upon the insured's death regardless of any changes the policy owner may wish to make. This can be particularly important in situations where the irrevocable beneficiary may be dependent on the policy for financial security. In contrast, a revocable beneficiary designation allows the policy owner the flexibility to change beneficiaries at any time without needing consent. Contingent and primary beneficiaries pertain to the order of payout upon the insured's death, but they do not inherently limit the policy owner's rights regarding changes to beneficiary designations.