What You Need to Know About Divorce and Life Insurance


Maybe you vowed till death do us part, but you’d do well to consider what happens to your life insurance policy in the event of a divorce. If it’s a term policy, maybe you can convince your soon-to-be ex-spouse to do the right thing and name the kids as beneficiaries and keep up the premiums. But if you’ve got a whole life policy with cash value, that’s an asset and its ownership could become a bone of contention in the settlement. 


Legal precedent has been established under which divorce courts can regard life insurance policies and benefits as an “item of property to be classified, valued and distributed.” That means that the cash surrender value of any life insurance bought during a marriage can be treated as a marital asset much like any other real property, but without restricting the rights of policy’s legal owner to designate beneficiaries in the future. 


Under the best, most amiable circumstances, a life insurance policy should be maintained to protect your income if you’re the spouse who is obligated to provide alimony and child support. In this case, you’d want to name your ex-spouse and beneficiary to ensure that he or she has the monetary wherewithal to adequately provide for your children. The majority of divorce courts actually stipulate that the providing spouse maintain a life insurance policy to cover support payments for as long as the court has mandated them.  If you’re concerned about the well-being of your children and/or ex-spouse, you may might even consider increasing your whole life coverage to adjust for increases in the cost of living and college tuition.


However, human nature being what it is, your situation may be less harmonious. That’s why many experts will advise you that if you’re the person who is making the life insurance premium payments you should make certain your whole life insurance policy is in your name. If you’re moving out of the family home, you would also be well advised to contact your life insurance policy provider and have the bills sent to your new address. This is critical because the legal owner of the life insurance policy is the person who controls the right to designate beneficiaries and also has control of the policy’s current and future cash value.

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