Irrevocable Beneficiary Meaning and Effects in Ontario

Most life insurance beneficiary designations can be changed whenever the policyholder wishes. An irrevocable beneficiary is the exception, and it can surprise people, for example after a separation, when they find they cannot simply change the form.

This article explains what irrevocable means under Ontario's Insurance Act, how such a designation is made, what the policyholder can no longer do alone, and the exceptions. It is general information, not advice on your policy.

What an irrevocable beneficiary is

Normally the insured may alter or revoke a beneficiary designation at any time by a declaration. Irrevocable means that right is given up for that beneficiary. While the irrevocable beneficiary is living, the insured cannot change or revoke the designation without that beneficiary's consent.

The Act also treats the money differently. For an irrevocable designation, the insurance money is not under the insured's control, is not subject to the insured's creditors and is not part of the insured's estate.

How an irrevocable designation is made

There are formal requirements. A beneficiary can be named irrevocably only in the contract, or in a declaration that is not part of a will. That declaration must be filed with the insurer at its head or principal office in Canada while the life insured is alive.

If someone tries to make a designation irrevocable in a will, or in a declaration that was not filed as required, the attempt is treated as an ordinary designation, which remains revocable. People sometimes believe a will makes a beneficiary permanent, but the Act says otherwise.

What the policyholder can and cannot do

The Act is also specific about the policy. The insured may assign, surrender or otherwise deal with the policy where the beneficiary is not named irrevocably, or where an irrevocable beneficiary has reached 18 and consents.

• Without consent, the insured may still exercise any rights under the contract that the Authority's rules prescribe.
• Anyone who acquires an interest in the policy takes it subject to the irrevocable beneficiary's rights, unless a consent or court order provides otherwise.
• Because the policy is encumbered, borrowing against it or cashing it in may require the beneficiary's agreement, so check the contract and ask the insurer.

Minors, incapacity and exceptions

If the irrevocable beneficiary is a minor or lacks capacity, they cannot give a meaningful consent. In that case, the insured may apply to court for an order allowing them to deal with the policy without that beneficiary's consent.

Protection from outside claims also has an exception for dependant support. When a court sets dependant support, life insurance the deceased owned is added back to the net estate, so a designated beneficiary can be reached by a support order. How that applies to a particular designation depends on the facts, so it is worth confirming with a lawyer.

Creditors and the estate

Where a beneficiary is designated, the insurance money is not part of the insured's estate and is not subject to the claims of the insured's creditors. While the designation is in effect, the insured's rights in the money and the contract are exempt from execution or seizure.

A beneficiary may also enforce payment in their own name, although the insurer can raise any defence it could have raised against the insured.

What to do next

• Check your policy and any declarations to see whether any beneficiary is named irrevocably.
• Ask the insurer to confirm in writing how a designation is recorded and whether the declaration was filed.
• If you want to change an irrevocable designation, ask whether the beneficiary will give written consent.
• If the beneficiary is a minor or lacks capacity, speak with a lawyer about applying for a court order.
• Before assigning, surrendering or borrowing against the policy, confirm what consent is needed.
• Seek advice early if separation, a domestic contract or a support claim is involved.

Frequently asked questions