Massachusetts Life Producer Practice Exam

What type of beneficiary designation requires the consent of the beneficiary for a policy loan?

1. Revocable beneficiary

2. Contingent beneficiary

3. Irrevocable beneficiary

4. Flexible beneficiary

The correct answer is: Irrevocable beneficiary

An irrevocable beneficiary designation requires the consent of the beneficiary for a policy loan. When a beneficiary is designated as irrevocable, the policyholder cannot make changes to the beneficiary designation or take any loans against the policy without the beneficiary's consent. This is because the irrevocable beneficiary has a vested interest in the policy, which means they have certain rights that must be respected. This arrangement protects the beneficiary's interest in the policy's benefits, ensuring that the policyholder cannot unilaterally access value from the policy, which could potentially diminish the death benefit they would receive upon the policyholder's passing. In contrast, with a revocable beneficiary, the policyholder can change beneficiaries and take loans without needing anyone else's permission.