Irrevocable Beneficiary – Definition
The term irrevocable beneficiary is mostly seen in life insurance policies regarding bank loans.
Before giving the easy explanation of irrevocable beneficiary, the dictionary meaning of the term should be understood well.
An irrevocable beneficiary is designating a beneficiary on the insurance policy who has rights on the insurance policy, which can only be changed upon the agreement of the particular beneficiary.
Irrevocable Beneficiary – Easy Definition (Example)
As stated earlier, the concept of irrevocable beneficiary is seen in the cases of credit insurance and life insurance. In that sense, the example situation will be given based on these insurance branches.
Think of someone who receives a bank loan and in return, the bank requires this person to buy a life insurance policy. The reason for that is, the bank wants to be the irrevocable beneficiary of that life insurance policy that the credit holder buys. If this person dies before paying back the bank loan, the insurance company will be responsible for paying back the loan of the insured person to the back. This is done by using the life insurance policy bought by that particular person with the statement of the bank being the irrevocable beneficiary of that life insurance policy. In order for the insurance company to do such a payment to the bank, it is necessary for the bank to be stated as the irrevocable beneficiary in that policy.
Even though most people see such life insurance policies where the bank is the irrevocable beneficiary; it guarantees the family of the credit holder in case of an unexpected death.