Certified Financial Consultant (CFC) Practice Exam

If a policyholder wishes to retain all rights over their life insurance policy while naming their spouse as a beneficiary, the spouse should be designated as which type of beneficiary?

1. Irrevocable beneficiary

2. Revocable beneficiary

3. Contingent beneficiary

4. Primary beneficiary

The correct answer is: Revocable beneficiary

In a life insurance policy, if a policyholder wishes to maintain full control over their policy and retain all rights to make changes, they should name their spouse as a revocable beneficiary. This designation allows the policyholder the flexibility to change the beneficiary designation at any time without needing consent from the spouse. By contrast, an irrevocable beneficiary designation would restrict the policyholder's ability to make changes to the beneficiary without the approval of the beneficiary, thereby relinquishing some control over the policy. The remaining options, such as contingent or primary beneficiary, do not inherently relate to the control aspect the policyholder wishes to maintain. A primary beneficiary is simply the first in line to receive benefits upon the policyholder's death, and a contingent beneficiary would receive benefits only if the primary beneficiary is unable to do so; neither designation inherently impacts the rights the policyholder holds over the policy itself. Thus, designating a spouse as a revocable beneficiary ensures that the policyholder retains the rights and flexibility they desire while still providing support through life insurance coverage.