Revocable vs Irrevocable Beneficiary on Ontario Insurance Policies

Many people are asked to choose between a revocable and an irrevocable beneficiary when they buy a policy, or discover the term in an old policy and are not sure what it means. The choice affects how much control you keep.

This article explains the difference in plain words, what the Ontario Insurance Act says about each, and what to check before you decide.

The basic difference

A revocable beneficiary is someone you can replace. You keep control, and you can change who receives the money. An irrevocable beneficiary has a stronger claim. Once named, you cannot change them without their consent.

Under the Insurance Act, an insured may designate themselves, their personal representative or a beneficiary to receive insurance money, by the contract or by a declaration.

How to make an irrevocable designation

An irrevocable designation must be made in the contract, or by a declaration filed with the insurer during the insured's lifetime. Putting it in a will does not work in the same way: a purported irrevocable designation in a will takes effect only as a revocable one.

If you want a designation to be locked in, use the insurer's own forms and ask for written confirmation that it has been recorded as irrevocable. Keep that confirmation with your records.

Changes, loans and consent

Changing an irrevocable beneficiary requires the beneficiary's consent. In practice, that means that you should expect to get their agreement in writing before the insurer will act on a change.

Other actions can also be affected by an irrevocable designation, such as borrowing against the policy, surrendering it or changing its terms. Whether the insurer needs the beneficiary's consent for those actions depends on the policy wording and the designation, so read your contract and ask the insurer or a lawyer before you act.

• Check whether the policy has a loan or cash value feature.
• Ask the insurer in writing what it requires if you want to borrow, surrender or change the policy.
• Find out whether the irrevocable beneficiary would need to sign.
• Keep copies of everything the insurer sends you.

What happens at death, and when there is a dispute

When the insured dies, the insurer pays according to the designation on file. If it is unclear who should be paid, an insurer that admits liability may apply to court to pay the money into court in specified cases, such as adverse claimants, an entitled person whose whereabouts are unknown, or no one who can give a valid discharge. The application can be made after more than 30 days from when the money became payable.

A designation of "heirs" or "estate" is deemed to designate the insured's personal representative. If that happens, the estate trustee deals with the money as part of winding up the affairs, including paying taxes, bills and other debts.

Ontario courts also apply a public policy rule that a criminal should not profit from their crime. A person who kills their spouse cannot obtain the spouse's life insurance proceeds. Exceptions exist, such as a finding of not criminally responsible because of mental disorder.

What to do next

• Find your policy and any declarations, and note whether each beneficiary is revocable or irrevocable.
• Ask the insurer to confirm the designation on file in writing.
• Think about whether you really want to give up the ability to make changes alone.
• Check your separation agreement, if you have one, since it may have its own requirements about insurance.
• Speak with a lawyer if a beneficiary will not consent to a change or if family members disagree.

If a family member has died and you are not sure which kind of designation applied, ask the insurer for a copy of the designation and speak with a lawyer if there is any dispute.

Frequently asked questions