Life Insurance After Divorce In 2024: What You Need To Know
Written by Daniel Ray, Life Insurance Expert |
✅
Fact Checked by
Lisamarie Monaco |
Editorial Disclosure
If you are searching for life insurance after divorce, this article will tell you what you need to know. My goals is to break it down the best way I can, as I have lived through this personally. Let’s dive in!
Facing life after divorce can be overwhelming, especially when thinking about the future. If you’re anything like me, pondering your own mortality isn’t on your favorite topics list.
However, for those who’ve recently experienced a divorce and seen a dip in their finances, it’s crucial to reevaluate life insurance.
Transitioning from a combined household to living separately means tighter budgets for many. Suddenly, supporting two households instead of one can strain finances.
Consequently, getting enough life insurance coverage becomes a challenge, not just for oneself but also for the kids.
Moreover, the cost of life insurance isn’t something to overlook. It can spark disagreements among those already navigating the tricky waters of divorce.
It’s essential to be informed and prepared for these discussions.
Table of contents
- What Happens To Life Insurance When You Divorce
- Joint Life Insurance policy After Divorce: Can It Work?
- Is Life Insurance An Asset In Divorce
- Can You Keep Life Insurance On A Divorced Spouse
- Can You Change Your Life Insurance Beneficiary During A Divorce
- How Divorce Impacts Your Insurance Premiums: What You Should Know
- Life Insurance Divorce Decree
- Life Insurance and Divorce Settlements
- What Type Of Life Insurance Policy Should I Purchase After Divorce?
- No Medical Exam Option
- Can You Keep Life Insurance On a Divorced Spouse
- how to split a life insurance policy in a divorce
- FAQs
- Conclusion
What Happens To Life Insurance When You Divorce
It is an often-overlooked element of divorce, yet one of the most important.
According to statistics today in 2023, about 35 to 50% of first marriages in the U.S. end in divorce. With that said, second marriages are at a 60-70% divorce rate. A pretty high rate of divorce, if you ask me.
Although, we never imagine when we get married that we would be divorcing the love of our life. Sadly, it happens and usually, the last piece of the puzzle in divorce is life insurance.
As a matter of fact, there are a few factors to consider when it comes to divorce settlements.
- Custody
- Assets
- Child Support
- Alimony/Maintenance
- Life Insurance
Take the emotion out of it.
Life Insurance Cash Value in Divorce
When children are in the mix, the end result will always be the same.
What is in the best interest of the children? From experience, it is best to make the divorce process like a business transaction.
With this in mind, take all the emotion out of it. In order to have an amicable, peaceful settlement, this is a must! (Trust me when I say, I know how you would rather see your Ex stuck in a ditch. LOL)
Of course, when young children are involved, I know how challenging this could be. Therefore, write everything down you want and what you are able to live within your divorce and for years to come.
Think of this is as an investment. Be clear about what is truly important to you.
Honestly, there has to be a give and take with your soon to be ex-spouse.
To emphasize, be very open to compromise and remember who is watching you through this divorce ~ Your Kids!
Joint Life Insurance policy After Divorce: Can It Work?
Many clients ask, Can you Keep Life Insurance After Divorce?
In the case that you have a joint life insurance policy, this policy cannot be divided. In regards to divorce and life insurance, one of you can decide to take over the policy as a single policy or just cancel it altogether.
Money-back in your pocket!
If you are unsure what to do, compare the cost of taking over the policy you already have in place and a new single policy. Your independent agent will be able to help you with decision making.
It is always best to ask for guidance because their goal is not only to provide you with the best choice for your children if there is a payout.. but if your independent agent is doing their job correctly, they will be saving you MONEY!
Is Life Insurance An Asset In Divorce
Is A Life Insurance Policy A Marital Asset?
When it comes to your term life policy they will consider this to be separate property.
This does not matter when the policy was obtained.
Now with a whole life policy, this will be considered marital property.
The courts will tell you the cash payout/surrender value will be subject to division between the two parties.
Can You Keep Life Insurance On A Divorced Spouse
Can You Take Out A Life Insurance Policy on Someone Without Their Knowledge?
Simple answer, NO. In order to take a policy out on someone you will need the following:
- consent
- prove insurable interest
- medical exam on the person to be insured
Life Insurance For Divorced Spouse
Life Insruance To Cover Alimony/Child Support
Will you receive alimony and/or child support after your divorce? You will want to protect that income. After a divorce, and your Ex dies, this money dies with him.
With that said, many clients purchase a life insurance policy on their ex. You have two choices, buy a brand-new policy or keep your current policy as long as the life insurance policy was purchased during your marriage.
Remember, you want a policy to be enough that it could replace the money you receive in those alimony/child support payments.*
Speak with your Independent Agent at PinnacleQuote, Owner/Agent ~ Danny Ray. He has 29+ years of experience. He will guide you throughout the entire process and he is an expert in this field.
Can You Change Your Life Insurance Beneficiary During A Divorce
Understanding Life Insurance Beneficiary Rules & Legalities
Navigating life post-divorce can be tricky, especially when finances are involved.
Many people wonder about the implications for life insurance. If you find yourself pondering, “Can I change my beneficiary now that I’m divorced?”, you’re in the right place.
Changing Beneficiary Details During Divorce: What to Know
Post-divorce, it’s crucial to re-evaluate the beneficiaries on your life insurance policy. Here’s why:
Your Priorities Shift: While your spouse might have been your primary beneficiary during your marriage, post-divorce, you might want to designate your children, a new partner, or even a charitable organization as your beneficiary.
Avoiding Future Complications: Leaving an ex-spouse as a beneficiary can result in unwanted disputes or legal battles in the event of your demise. Changing it in advance eliminates this possibility.
State Laws & Policies: Some states have laws that automatically revoke a beneficiary designation to an ex-spouse post-divorce, but it’s not universal. It’s essential to know your state’s regulations and ensure your policy is in line with your wishes.
Irrevocable Beneficiary Vs. Revocable Beneficiary
Irrevocable Beneficiary: requires the owner to get the consent of the beneficiary to sign off on any policy changes.
Revocable Beneficiary: changes can be made by the owner of the policy without the consent of the beneficiary.
How Divorce Impacts Your Insurance Premiums: What You Should Know
Lisamarie’s Pro Tip #1:
First and foremost, consider handling your insurance premiums personally. Why?
By doing this, you’re taking proactive measures to ensure that the premiums get paid on time.
This way, there’s no risk of your ex-partner forgetting or neglecting to make the payments.
After all, you parted ways for a reason, and relying on them for crucial financial matters might not be in your best interest.
Here’s an analogy for you: Relying on an ex to pay your premiums is like brushing your teeth and then munching on Oreo cookies. It counteracts the effort. Imagine the hassle of dealing with missed payments and the looming threat of your policy getting terminated by the insurance company.
You’ve already endured years of ups and downs with your ex-spouse. Why complicate things further? Take charge of your financial future and maintain peace of mind.
Lisamarie Pro Tip #2: Always consult your attorney regarding legalities.
Make sure you are the owner of the policy! This gives you total control of the policy.
In fact, you will be able to change the mode of payment, control over the face value and be in control of changing the beneficiary/beneficiaries.
With that being said, for this to be a smooth, easy process that your Ex will not give you a difficult time about, it is ideal for you to be:
- The Payor of policy
- Beneficiary
- Owner
Please note, if you decide to keep an existing policy, I urge you to consult with your attorney. There will be waivers/forms to sign in this agreement to change ownership. Protect yourself!
Life Insurance Divorce Decree
Court Ordered Divorce Decree And Life Insurance
So almost 100% of the time the “breadwinner” of the dissolving marriage ordered by the court to purchase the life insurance policy. The reason for this is to bridge the gap in the event of the breadwinners’ death.
Your children and you do not miss a beat, and will not lose out on the following.
- Child support
- Alimony
- Tuition
- Their home
*This is usually until the children are 18 years of age.
Life Insurance and Divorce Settlements
In divorce situations, both parties should want a life insurance policy in place. In the first place, it protects you, your Ex and most of all, your children you have together.
Important to realize, this is to insure that in the event of a parents death, the children/beneficiaries are provided for.
Check the state you live in. There could be different laws in each state…
Life Insurance And Divorce In New York
For instance, in New York State, a court can demand that an existing life insurance policy is kept intact with your soon to be Ex. With you and your minor children remaining as beneficiaries.
However, the court can not force you to obtain one unless it is part of a stipulation that you and your Ex-agree to.
*In some cases it can and will be court-ordered.
That depends on you, the more amicable you and your Ex are, the less the court has to intervene.
So what about life insurance beneficiary after divorce? If you are in the process of separating and divorce, your soon to be Ex-spouse who is the owner of the policy does have the rights to change the beneficiary.
In the event that he/she makes changes, speak to your attorney regarding your rights.
What about Alimony Life Insurance
Your ex-spouse is not permitted to deduct life insurance premiums from an alimony payment. Unless otherwise ordered by a Judge in a court.
However, if the ex-spouse is making the payments for life policy those premiums may be deducted. It is imperative you inquire with your attorney for clarification.
What Type Of Life Insurance Policy Should I Purchase After Divorce?
Frequently, many clients ask which type of life insurance should I purchase after divorce. Below, I will give you the break down of Term Life Insurance Vs. Whole Life Insurance.
Term Life Insurance: Term life insurance is truly the most popular choice for young families/adults to provide coverage for their family.
You choose the term, either 5, 10, 20 or 30 years, and you also choose the coverage amount. Once the term ends. Coverage ends. Simple as that. Of course, you can renew.
In fact, term life is the cheapest affordable life insurance. Honestly, when deciding on coverage amount, half-million or a million-dollar policy is something to consider when you have small children.
You want enough coverage to get them out of school and out of the house.
- High School
- College
- Marriage
Whole Life Insurance: First, Whole life insurance is a bit pricier. Secondly, it provides you coverage for your entire life. Thirdly, it holds a cash value. (Not as popular as Term.)
Lastly, whole life is geared more towards elderly clients and for Final Expense and Living benefits life insurance.
No Medical Exam Option
To make things super easy and not have to deal with your Ex Spouse’s nonsense, You could opt for a no medical exam policy. All that is required is the application and a lifestyle questionnaire. A few top-rated A+ carriers we like are:
- Mutual of Omaha
- Phoenix
- American National
- Foresters
When You Need A Life Insurance Divorce Attorney
Certainly, life insurance after divorce can be tricky. Contact a reputable life insurance attorney before a dispute arises with the beneficiaries. They will help you with the following:
- Multiple beneficiaries disputing in the event of policy owner’s death
- Beneficiary not listed on the policy
- Change of beneficiary without permission and illegally
- Surviving spouse and the ex-spouse disputes
- Children dispute over beneficiary and payout
Can You Keep Life Insurance On a Divorced Spouse
Let’s Recap: What Happens To Life Insurance In Divorce?
In the first place, divorce gets messy. To put it differently, dealing with an Ex is plain exhausting. Clients forget about Life insurance during a divorce.
Given these points, it creates a lot of anxiety as at the last minute of a divorce settlement. Clients often call us in a panic because they must have a policy in place before their next court date or settlement.
Consequently, in some cases, the court may mandate you have a policy in place by a certain date.
In conclusion, we urge you to make sure this is a top priority. At the beginning of your divorce, not at the end.
how to split a life insurance policy in a divorce
It is a great idea to have financial planners to help you during the divorce process. Besides health insurance is important for you and your family, you will have to discuss bank accounts, products, and services regarding permanent life insurance coverage. In addition to premium payment and the death benefit.
Make a list of everything. Nothing should be left out! Negotiate anything and everything so that way, later on, you will not be in a big mess of confusion!
Lisamarie’s Thoughts on life insurance and divorce
As a mom of 4 children, For this reason, (from a mom standpoint) I highly recommend having life insurance for both parties in place. As you already know at this point, it is not about you and your Ex anymore.
In other words, it is about your children.
Important to realize, life insurance ensures what you had envisioned for their future be kept intact.
Truly, it protects you financially.
Occasionally, an Ex-husband / Ex-wife already has a life insurance policy in place through their employment. From experience, I recommend you inquire with your attorney.
With this in mind, insist your Ex purchase an additional policy as part of your divorce settlement.
Reasons are:
- Loss of employment,
- Becomes disabled,
- Quits employment
FAQs
A contingent beneficiary is like a backup person you choose. If your main beneficiary (the first person you pick) can’t receive the insurance money, the contingent beneficiary gets it. Think of it as having a “Plan B” for where your money goes.
Yes, you can change beneficiaries unless bound by divorce agreements or court orders. It’s advisable to review and update your beneficiary designations post-divorce.
Consider getting a new policy if you have new financial obligations or beneficiaries, like children, to protect after the divorce.
Joint policies might need to be split or one party may take over the policy. This depends on the policy terms and divorce settlement agreements.
High net worth individuals should pay special attention to how life insurance fits into their overall financial and estate planning after a divorce.
If you own the policy and there are no stipulations in the divorce decree, you can typically remove your ex-spouse as the beneficiary.
Policies with a cash value component may be considered marital assets and subject to division during a divorce. Legal and financial advice is recommended in these cases.
If you need to purchase a new policy post-divorce, premiums may be higher, especially if you are older or have health issues compared to when the original policy was taken.
Even without dependents, life insurance can be important for covering debts, funeral expenses, or as part of a financial strategy, especially if you have a new partner or dependents in the future.
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Conclusion
When you’re about to get divorced, it’s important that you make sure your life insurance is up-to-date.
You don’t want anything left undone at the last minute when all of a sudden everything becomes so much more complicated!
Nothing will be worse than having your family find out later on down the line that they were not adequately taken care of because someone didn’t take an extra step and update their policy before getting remarried or changing jobs.
We can help with this too – we’ll work with you to make sure that your loved ones are cared for in case something happens while transitioning into new phases of life after divorce.
Life insurance does not have to cost an arm and leg. There are inexpensive tailor made options for you. Not just with divorce, there a so many reasons you should have a policy in place. Keep in mind, the people you leave behind when you pass away.
If you need any clarification, please feel free to reach out anytime and our team would be happy to answer any questions that you might have.
