What is a 'beneficiary designation' and what is the difference between a revocable and irrevocable beneficiary?

BENEFICIARY DESIGNATIONS are one of the most important elements of a life insurance policy — they determine who receives the death benefit and under what conditions. REVOCABLE BENEFICIARY (default designation in most policies): The policyowner can change the beneficiary at any time without notifying or getting consent from the current beneficiary; the beneficiary has no vested rights while the policyowner is alive; the policyowner retains all ownership rights (can loan, surrender, change, etc.); IRREVOCABLE BENEFICIARY: Once designated as irrevocable, the beneficiary has vested rights; the policyowner CANNOT: change the beneficiary without the irrevocable beneficiary's written consent; take a policy loan without irrevocable beneficiary's consent; surrender the policy for cash value without consent; assign the policy without consent; WHY IRREVOCABLE DESIGNATIONS ARE USED: Divorce settlements (to ensure ex-spouse or child support is guaranteed); business arrangements (key person insurance, buy-sell agreements); creditor protection in some states; BENEFICIARY CLASSES: PRIMARY — receives the death benefit if alive at the insured's death; CONTINGENT (SECONDARY) — receives the benefit if the primary beneficiary predeceases the insured or dies simultaneously; COMMON MISTAKE: Many people fail to update beneficiary designations after divorce, remarriage, or the death of a named beneficiary — the insurance company pays whoever is named on the policy, regardless of the policyowner's current intentions; beneficiary designations in life insurance generally override a will.