New Jersey Life and Health State Practice Exam

Sharon has a $50,000 life insurance policy and her son Mike is the beneficiary. If she must obtain Mike's signature to change the beneficiary, what kind of beneficiary designation is this?

1. Contingent

2. Revocable

3. Irrevocable

4. Tertiary

The correct answer is: Irrevocable

The correct answer is that Sharon has an irrevocable beneficiary designation. In this case, an irrevocable beneficiary means that the beneficiary (Mike) has certain rights to the policy, specifically the right to provide consent for any changes made to the beneficiary designation. This means that Sharon cannot change the beneficiary to someone else without obtaining Mike's signature, as his status provides him with legal rights to the policy. When a beneficiary designation is irrevocable, it ensures the chosen beneficiary holds a secured interest in the policy, and the policyholder cannot alter those terms unilaterally. This is essential for protecting the beneficiary’s rights in the event of a policyholder’s death, preventing any changes that could affect what the beneficiary is legally entitled to receive. In contrast, a revocable beneficiary designation allows the policyholder to change the beneficiary at any time without needing consent from the current beneficiary. A contingent beneficiary would only receive the benefits if the primary beneficiary were to predecease the policyholder or otherwise become unable to claim the benefits. A tertiary beneficiary is next in line after the primary and contingent beneficiaries and is similarly affected by changes in status among the others. However, in Sharon's case, the requirement of Mike's signature to make any changes specifically defines the irrev