How to Handle a Life Insurance Policy After a Divorce [2023]
What happens with term life insurance when you get divorced will vary depending on the settlement. Depending on your situation, you might negotiate transferring ownership of your term life policy to your ex-spouse.
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Zach Fagiano
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Zach Fagiano has been in the insurance industry for over 10 years, specializing in property and casualty and risk management consulting. He started out specializing in small businesses and moved up to large commercial real estate risks. During that time, he acquired property & casualty, life & health, and surplus lines brokers licenses. He’s now the Senior Vice President overseeing globa...
Licensed Insurance Broker
UPDATED: Nov 15, 2023
It’s all about you. We want to help you make the right life insurance coverage choices.
Advertiser Disclosure: We strive to help you make confident life insurance decisions. Comparison shopping should be easy. We are not affiliated with any one life insurance company and cannot guarantee quotes from any single company.
Our life insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different life insurance companies please enter your ZIP code above to use the free quote tool. The more quotes you compare, the more chances to save.
Editorial Guidelines: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective, third-party resource for everything life insurance-related. We update our site regularly, and all content is reviewed by life insurance experts.
UPDATED: Nov 15, 2023
It’s all about you. We want to help you make the right life insurance coverage choices.
Advertiser Disclosure: We strive to help you make confident life insurance decisions. Comparison shopping should be easy. We are not affiliated with any one life insurance company and cannot guarantee quotes from any single company.
Our life insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different life insurance companies please enter your ZIP code above to use the free quote tool. The more quotes you compare, the more chances to save.
On This Page
The one thing that’s certain about life is it’s anything but certain. Not everything goes our way or as we expect it to. Sadly, that applies to marriage, too.
No one (at least no one whom I’ve ever known) gets married thinking that it won’t last “until death do we part.” But people grow apart. People take each other for granted. People decide they want out.
Nearly half of all marriages end in divorce according to statistics from the CDC/National Center for Health Statistics.
So what do you do if you get divorced and have a term life insurance policy with your ex-spouse as a beneficiary?
The answer: It depends.
Term Life Insurance During a Divorce
Your options for life insurance after a divorce will vary depending on the divorce settlement.
Quite commonly, divorce agreements state that one spouse, generally the parent paying child support or alimony, must maintain life insurance on themselves to provide some financial stability for their ex if they pass away before they’ve met their financial obligations. So if you have a term life policy, you may need to keep it. If you don’t have a life insurance policy, you may need to apply for one if there’s a court order requiring you to get one.
Depending on your situation, you might negotiate transferring ownership of your term life policy to your ex-spouse. In that scenario, your ex-spouse would remain as the beneficiary while assuming responsibility for paying the policy’s premiums. Can’t pay the premium? Learn more here: What Happens if You Can’t Pay Your Term Life Premium.
What if you don’t have children and you purchased your term life policy to help your spouse pay off your home mortgage or pay off other debt if you were to die? You may want to discuss terminating the policy since its original purpose may no longer be a priority for you.
If you have older children dependent on you financially, can you change your life insurance beneficiary? The option might be to remove your ex-spouse as a beneficiary and change your children’s designation to primary beneficiaries.
These are just a few directions things could go. Again, your options will vary according to your divorce settlement and related court decisions.
Educate Yourself About Your Options and Get Expert Guidance
Although term life isn’t considered an investment in marital property like whole life insurance with a cash value, it still requires attention when you’re going through a divorce.
Talk with your attorney and a financial planning professional about your options. There’s no one-size-fits-all solution, so it’s important to discuss your situation with trusted experts who can cover all the bases.
Although I’m not divorced, I have a fair share of family members and friends who have gone through it. Whether a divorce is amicable or not, it’s extremely stressful. Empowering yourself with knowledge and sound advice won’t eliminate the heartache, but it can minimize the headaches.
Haven’t looked into the affordability of term life yet? Get a free, no-obligation term life insurance quote now and connect with a knowledgeable insurance professional who can answer your questions.
Case Studies: Handling Life Insurance Policies After Divorce
Case Study 1: Transferring Ownership
Sarah and John recently divorced, and they had a term life insurance policy with Sarah as the insured and John as the beneficiary. As part of their divorce settlement, they agreed that John would assume ownership of the policy.
This arrangement ensures financial stability for Sarah and their children if anything were to happen to her. By transferring ownership, John becomes responsible for paying the policy premiums, and he remains the beneficiary.
Case Study 2: Terminating the Policy
Mark and Lisa decided to end their marriage amicably. They had purchased a term life insurance policy to cover their mortgage in case either of them passed away. However, after the divorce, paying off the mortgage is no longer a priority for either of them.
They discussed terminating the policy and decided it was the best course of action. They canceled the policy, as it no longer served its original purpose.
Case Study 3: Changing Beneficiaries
Amy and Michael divorced, and they had a term life insurance policy with Amy as the insured and Michael as the beneficiary. They have two children who are financially dependent on both parents.
As part of their divorce settlement, they agreed to remove Michael as the beneficiary and change the designation to their children as primary beneficiaries.This change ensures that their children will be financially protected in the event of Amy’s passing.
Frequently Asked Questions
Can I transfer the ownership of the life insurance policy to my ex-spouse?
Yes, it is possible to transfer the ownership of a life insurance policy to your ex-spouse if both parties agree to it. This can be done through a process called an “absolute assignment” or “policy transfer.” However, it’s crucial to consult with your insurance provider and legal professionals to understand the implications and requirements involved in this transfer.
What happens if my ex-spouse is the policy owner?
If your ex-spouse is the owner of the life insurance policy, they have the right to make decisions regarding the policy, including changing beneficiaries or canceling the coverage. As the insured individual, it’s important to keep open communication and monitor the policy to ensure it aligns with your wishes and financial situation.
What should I do if my ex-spouse is the beneficiary of my life insurance policy?
If your ex-spouse is currently listed as the beneficiary, and you wish to remove or change them, you need to contact your insurance provider. They will guide you through the necessary steps to update the beneficiary designation according to your preferences.
Is a life insurance policy affected by the divorce agreement?
Yes, a life insurance policy can be impacted by the terms outlined in the divorce agreement. It’s essential to carefully review the agreement to understand any specific requirements or provisions related to life insurance. If the agreement specifies obligations regarding life insurance, such as maintaining coverage or designating specific beneficiaries, it is important to comply with those provisions.
Should I consult an attorney or financial advisor when dealing with my life insurance policy after a divorce?
Yes, seeking advice from professionals, such as an attorney specializing in family law or a financial advisor, can be highly beneficial when navigating the complexities of life insurance after a divorce. They can provide guidance tailored to your unique circumstances, ensuring that you make informed decisions that align with your financial goals and obligations.
Your life insurance quotes are always free.
Secured with SHA-256 Encryption
Zach Fagiano
Licensed Insurance Broker
Zach Fagiano has been in the insurance industry for over 10 years, specializing in property and casualty and risk management consulting. He started out specializing in small businesses and moved up to large commercial real estate risks. During that time, he acquired property & casualty, life & health, and surplus lines brokers licenses. He’s now the Senior Vice President overseeing globa...
Licensed Insurance Broker
Editorial Guidelines: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective, third-party resource for everything life insurance-related. We update our site regularly, and all content is reviewed by life insurance experts.
