How does life insurance work during a divorce?

There are two main considerations that people going through the process of divorce have about life insurance.

First: they want to know how the divorce will affect any life insurance policy or policies they purchased during the marriage. (Is life insurance a marital asset? Should the policies be split? Can they change beneficiaries?)

Second, they want to know whether they should ask for new policies as part of the divorce settlement, or if the divorce agreement does require court-appointed life insurance, how to go about buying it.

Read more:

• Is life insurance a marital asset?
• Does divorce invalidate your life insurance policies?
• Should you ask for life insurance in a divorce?
• How to buy court-ordered life insurance

Is life insurance a marital asset?

There are two types of life insurance: term life insurance, which lasts for a set term, and permanent life insurance, which lasts until death and has a cash value.

A term life insurance policy has no cash value, so term policies will not be taken into account as assets when dividing property during the divorce process.

However, if you or your ex-spouse own any permanent life insurance policies, these do have a cash value and will need to be counted as assets.

Joint or survivorship policies, which insure two people, are types of permanent policies, and these may be able to be split into separate policies, but will first need to be listed as assets.

Does divorce invalidate your life insurance policies?

Each life insurance policy has three components:

• The policy owner — controls the policy and can make changes
• The insured — is covered by the policy
• The policy beneficiary — receives the death benefit if the insured dies.

The owner and the insured can be the same person, or they can be different people. The insured and the beneficiary are always different people.

Divorce will not automatically change the policy owner, the insured, or the policy beneficiary in any policies you or your ex-spouse currently own, and divorce also doesn’t cancel any of those policies.

However, even though the act of divorce doesn't lead to any automatic changes, there are some changes you may want to make to policies you own or questions you may have about policies your spouse owns:

If your ex-spouse owns a life insurance policy that insures you and lists them as the beneficiary, can they keep it?

If your ex-spouse has a policy that insures you and they are the beneficiary, they can keep that policy. You can certainly request that your ex-spouse change the beneficiary to your dependent children, for example, but they cannot be forced to do that.

If your ex-spouse owns a life insurance policy that insures them and lists you as the beneficiary, are they allowed to change the beneficiary?

If your ex-spouse’s life insurance policy insures them and you are the beneficiary, they can change the beneficiary without your permission. However, if you ask for and receive life insurance as part of the divorce agreement, the judge could order them to keep you as the beneficiary on a current policy (see more about court-ordered life insurance below).

If you own a life insurance policy that insures you and lists your ex as a beneficiary, can you change the beneficiary?

If you own a life insurance policy that insures you and names your ex-spouse as the beneficiary, your ex-spouse will still be your beneficiary even after you divorce — unless you change your beneficiary. However, a judge could order that you keep your ex as your beneficiary if you owe them alimony or child support. Otherwise, you are free to change the beneficiary.

How to change your beneficiaries after a divorce

Some life insurance companies allow you to change beneficiaries online; others require signed paperwork. You can contact your life insurance company or broker to get help changing the beneficiary on your policy.

You can change your beneficiaries to anyone you like, though there are some special steps you should take if you want to name your children your beneficiaries.

Read more about how to update your beneficiaries.

Should you ask for life insurance in a divorce?

There are three main reasons to ask for life insurance in a divorce:

• To protect alimony payments that you will receive
• To protect child support payments that you will receive
• To protect pension or retirement funds that you will receive

If you are seeking or have a right to any financial payments from your ex and would be hurt financially if the ex were to die, then it may make sense for you to ask for life insurance in the divorce to protect those payments.

Many family lawyers will advise that if one ex-spouse is required to give support to the other that they have life insurance to ensure that those financial obligations are met even if the breadwinner dies.

Once you and your lawyers each make your demands, a judge will deliver the divorce decree, which may require your ex-spouse to purchase court-ordered life insurance.

How to buy court-ordered life insurance

After you and your ex-spouse work with your own lawyers on your divorce agreement, a judge will ultimately decide the outcome in what is called the divorce decree.

If the decree includes you making either alimony payments or child support payments to your ex-spouse, or if it grants your ex-spouse a portion of your pension or retirement savings, life insurance may be an additional part of the decree. This is called court-ordered life insurance, and you will usually be given a deadline by which you need to have secured a policy.

If the court orders you to buy life insurance after a divorce, there are four things to keep in mind:

1. Get started ASAP

The average time it takes to purchase life insurance from quotes to a signed policy is four to six weeks. So you should start the life insurance buying process as soon as you can to ensure you have a policy in place by the court’s deadline.

You can get started by answering just a few easy questions.

2. Communicate about the policy from the start

You should decide with your ex-spouse (and your lawyers, if you have them) how to set up the policy. Who will own it? How long should the term be and how much coverage should it have? Who will pay the premiums?

There are two ways to set up the policy to ensure that your ex receives the benefit: either they can be the owner of the policy and the beneficiary, or you can be the owner of the policy and you can name them as an irrevocable beneficiary, which would mean that you can not change the beneficiary and that they would get notices about any lapses in payment or policy changes.

3. Get proof for court

If you need proof of application for court, the broker or insurance company should be able to give you a copy of your signed application. If you opted for temporary coverage when you applied, a receipt of payment will also work.