Minnesota Life Insurance License Practice Exam

In which scenario does a policyholder have an irrevocable beneficiary?

1. A beneficiary who can be changed anytime

2. A beneficiary who can only be changed under specific conditions

3. A beneficiary who has no rights to the death benefit

4. A beneficiary designated with the owner’s consent

The correct answer is: A beneficiary who can only be changed under specific conditions

The correct choice describes a scenario where a beneficiary can only be changed under specific conditions, which characterizes the concept of an irrevocable beneficiary. When a policyholder designates an irrevocable beneficiary, it means that the beneficiary's rights are secured and cannot be modified or removed without that beneficiary's consent. Therefore, if the policyholder plans to make any changes to the beneficiary designation or even cancel the policy, they must first obtain approval from the irrevocable beneficiary. This ensures that the beneficiary has certain protections and rights regarding the death benefit, reflecting the intent of the policyholder to provide security to that beneficiary. In contrast, a revocable beneficiary can be changed at will by the policyholder without needing consent, which does not apply to irrevocable beneficiaries. Thus, having an irrevocable beneficiary reflects a commitment to ensuring the beneficiary's entitlements to the benefits outlined in the policy.