What You Need to Know About Divorce and Life Insurance

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

What Happens to Life Insurance After Divorce?

After a divorce, life insurance policies may need adjustments. This can involve changing the beneficiary, which is the person who receives the payout from the policy. Often, spouses are listed as beneficiaries, but post-divorce, you might want to name children, siblings, or a trust as your beneficiary.

Examples:

  1. Changing Beneficiary: John had his ex-wife as his life insurance beneficiary. Post-divorce, he changed it to his children.
  2. Maintaining Coverage: Emily kept her ex-husband as the beneficiary to support their children in case of her passing.
Divorce And Life Insurance

Adjusting Policy Coverage and Premiums

How Do Policy Coverage and Premiums Change?

Divorce can affect your financial situation, prompting a need to review your life insurance coverage. You might need to increase or decrease your coverage based on new financial responsibilities or changes in income.

Examples:

  1. Increasing Coverage: After the divorce, David increased his life insurance to ensure his children’s financial security.
  2. Reducing Premiums: Anna reduced her coverage, thus lowering her premiums, as her financial obligations decreased post-divorce.

Importance of Updating Your Policy

Why is it Crucial to Update Your Life Insurance After Divorce?

Updating your policy ensures that your life insurance aligns with your current wishes and circumstances. It also helps in avoiding legal complications and ensures that the right beneficiaries receive the benefits.

Examples:

  1. Avoiding Legal Issues: Mark updated his policy to prevent legal disputes between his ex-spouse and children over the benefits.
  2. Reflecting Current Wishes: Laura revised her beneficiary to her sister, reflecting her current support system.
Divorce In Life Insurance

Life Insurance Adjustments Post-Divorce

ScenarioAction TakenReason
Change in financial obligationsAdjust coverage amountAlign with new financial needs
Change in beneficiary preferenceUpdate beneficiaryReflect current wishes
Legal requirements (e.g., child support)Maintain ex-spouse as beneficiaryComply with legal obligations

Conclusion

Adjusting your life insurance after divorce is crucial to ensure it reflects your current financial situation and beneficiary preferences. Review and update your policy to avoid legal issues and ensure your loved ones are protected. Contact us today for a free quote.

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Frequently Asked Questions

How Is Life Insurance Handled In A Divorce

Life insurance is typically handled in a divorce settlement with the same process as other assets. If you own the policy, it’s considered an asset that may be divided in the territory. You and your spouse can negotiate who will get the procedure or if one of you will buy out the other’s portion.

Is Life Insurance A Marital Asset?

Yes, life insurance is considered a marital asset in most cases. Therefore, if the policy was removed during the marriage, it might be divided as part of the divorce settlement. However, if the procedure was created before the wedding, it will usually remain with that party after the divorce.

Who Becomes Beneficiary After Divorce?

After a divorce, you must choose a new beneficiary for your life insurance policy. This could be your children, other family members, or another person of your choosing. Therefore, updating the beneficiary designation as soon as possible after the divorce is finalized is essential.

Is My Ex-Wife Entitled To Life Insurance Benefits?

Typically, your ex-spouse is not entitled to life insurance benefits unless they are named as the beneficiary in your policy. You should make sure that you update the beneficiary designation after the divorce to ensure that it reflects your wishes and intentions.

*Disclosure: Some of the links in this guide may be affiliate links. I may receive a commission at no cost to you if you purchase a policy. It helps us keep the lights on!

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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