Divorce creates significant complications for life insurance policies, especially when an ex-spouse is named as beneficiary or when policies were purchased as part of the marital financial plan. Addressing life insurance during divorce proceedings is essential.
Failing to update your life insurance after divorce can lead to unintended consequences for your heirs.
Beneficiary Changes After Divorce
In most states, you can change your beneficiary at any time after divorce. However, some states have laws that automatically revoke an ex-spouse as beneficiary upon divorce, while others do not. Don’t assume your state handles it — actively update your beneficiary designation.
If your divorce decree requires you to maintain coverage naming your ex-spouse as beneficiary (common when there are children), you must comply with that legal obligation.
Court-Ordered Life Insurance
Divorce agreements often require one or both spouses to maintain life insurance to secure alimony and child support obligations. The coverage amount typically corresponds to the total remaining support obligation and decreases over time.
The supported spouse is often named as both beneficiary and policy owner to ensure the obligation isn’t circumvented.
Dividing Existing Policies
Permanent life insurance policies with cash value are marital assets that must be divided. Options include surrendering the policy and splitting the cash value, one spouse buying out the other’s share, or maintaining the policy and adjusting other asset divisions to compensate.
Work with both a divorce attorney and financial advisor to handle life insurance correctly during your divorce.