How Life Insurance Works After a Divorce

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Contributor, Benzinga
December 10, 2021

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Divorce is messy, and picking up the pieces can be complicated, including the financial aspects of a couple's life, such as dividing assets, property and dealing with life insurance policies. The owner of a life insurance policy is the only one allowed to make any changes to the policy unless the judge grants you the life insurance policy as part of a divorce settlement. 

You may or may not want or need to make changes to a life insurance policy after a divorce. Read on to learn more.

Insurance Changes to Make After a Divorce

No one goes into a marriage with the idea that it will end in divorce, but you want the process to go as smoothly as possible when it does happen. While some couples are lucky enough to remain amicable, other couples experience acrimonious divorces. If you don't end things on the best terms with your ex, you're likely not going to want to leave your spouse as your beneficiary on your life insurance policy. Both spouses may wish to keep life insurance policies completely separate without designating one another as beneficiaries.

However, the Insurance Information Institute (III) makes some good points of instances when it could be beneficial to keep life insurance on a former spouse. If one spouse supports the other spouse and dependent children through alimony and child support, what happens if that ex-spouse suddenly dies? During divorce proceedings, the divorce decree can include the price of the life insurance premium. It is also possible, especially if you two ended on good terms, you want to leave your ex-spouse something to help with things like taking care of your children. 

If your ex-spouse has a life insurance policy on you and is the beneficiary, there isn't much you can do about it. You can ask your ex-spouse to change the beneficiary or drop the coverage, but it is not required unless ordered by the court. Some life insurance policies have irrevocable beneficiaries, meaning once you designate a beneficiary, you cannot change it. Both parties of a divorce should seek legal counsel to see if life insurance policies need modification after a marital state change and its financial implications.

Life Insurance as a Marital Investment

While your life insurance policy itself is not an asset, whole life policies have an additional component called the cash value that you can borrow from the policy. The cash value aspect makes the whole life policy a financial asset. Term life policies are generally considered as separate property because they hold no monetary value while you are still alive. The cash value of a permanent life insurance policy is considered part of your net worth and can be divided as a marital asset. In an equitable divorce, this factor would mean you leave the marriage with half the value of the life insurance policy.

Handling Life Insurance With Your Attorney

Making sure your loved ones are taken care of is a top priority. That's why you'll need professional legal counsel for help determining who benefits from your life insurance once you die. Your attorney can help you determine the future purpose of your existing and new policies in the context of the divorce. Suppose you are worried about the cost of handling life insurance transactions with an attorney and all the associated legal expenses with estate planning. In that case, you may want to check into legal insurance, which can help pay for things like legal document preparation or buying and selling property.

Review the Divorce Agreement Details

Before you sign any documents, make sure they meet your needs and that you'll be able to comply with them. If you have questions about how life insurance will be divided between you and your spouse, now is the time to ask your questions. It would help if you had your attorney review any divorce documents before signing.

Types of Life Insurance

Depending on the type of life insurance policy you have, it may or may not be considered a marital asset. Take some time to understand the different types of life insurance policies and how they are treated during a divorce proceeding.

Term Life Insurance

A term life insurance policy provides a death benefit to your beneficiaries but has no cash value. The term life policy covers a specified term of 10, 15, 20, or 30 years. During a divorce proceeding, it is treated as separate property and not a marital asset since the benefits aren't accessible before death.

Whole Life Insurance

Whole life, or permanent life insurance, provides coverage for your entire life. Most whole life policies accumulate cash value which you can borrow against. Whole life policies are considered a marital asset during divorce proceedings.

Universal Life Insurance

Universal life insurance is much like whole life insurance but has a savings option added in. Universal life insurance premiums are cheaper than a whole life policy and have flexible payment options. Since the universal policy accumulates cash value just as the whole life policy, it is also considered a marital asset a judge will likely divide during a divorce.

Universal Variable Life Insurance

The universal variable life insurance is a whole life insurance policy that accumulates a cash value. That cash value is invested to generate greater returns. It is a riskier policy as there is also a potential to lose money due to market fluctuations. As with the whole and universal policies, the cash value aspect makes the universal variable life insurance policy a part of the marital assets and possibly divided during a divorce.

Life Insurance as Pension Protection

Dependent care and alimony support are the main reasons for a divorce-related life insurance policy, but pension protection is another consideration. Most pension plans provide monthly income payments once you retire. Pension plans have two options of how benefits are paid to you; you can choose the life-only benefit option or the joint-survivor benefit option.

The life-only option pays you a more significant benefit amount, but your spouse does not receive benefits once you die. The joint-survivor benefit option offers a reduced benefit amount but allows your spouse to continue to receive benefit payments after your death. You can choose the life-only benefit option and still have your joint survivor receive benefits from your pension if you allocate a portion of your retirement funds to a life insurance policy, protecting your pension.

Life Insurance Order from the Court

A judge may decree life insurance as a part of the spousal support in your divorce settlement. The life insurance policy order is intended to ensure your dependents continue receiving support even after you die. The amount of life insurance a judge orders you to purchase will likely align with the amount of support you must pay. Court-ordered life insurance policies can list the ex-spouse, a dependent child or a custodian as the beneficiary. 

Compare Life Insurance

Divorce is a transitional period for you and your family. Once you've gotten through this trying time, you'll want to review your life insurance coverage to ensure you and your family are adequately protected. We've gathered a list of top life insurance companies to assist you in searching for the best policy to suit your family's needs.

Ensuring Fairness in Life Insurance Policies After Divorce

When going through a divorce, the most important thing is to make sure your children are taken care of no matter what. You must ensure your children are properly protected through life insurance. If you have questions about how to handle life insurance after your divorce, the best course of action is to seek legal advice from a qualified legal professional.

Frequently Asked Questions


How is life insurance split in a divorce?


Whole life policies that have a cash value are considered marital assets. In most divorce situations, the assets are divided equally between the two parties.


Can my ex-wife take out a life insurance policy on me?


If you take a life insurance policy out on someone, there must be an insurable interest, which would be the case if you pay alimony or child support to your ex-wife. Most life insurers in such a case will want you to sign the insurance application before it goes through the underwriting process.


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