What type of life insurance do you have?
To some extent, how your life insurance is affected by your divorce will depend on what type it is.
If it’s term life insurance, it’s usually not considered to be part of the matrimonial property, so it’s unaffected.
If it’s permanent life insurance, the cash value in the policy may be considered as matrimonial property to be divided or equalized between the spouses.
If it’s a joint life insurance policy (where both spouses are covered by 1 policy), they’ll likely want the joint policy split into 2 individual policies.
Updating your beneficiary after divorce
If you have individual life insurance (either personal or group), and you don’t want to your ex-spouse to receive the payout from policy when you die, you’ll need to change the policy’s beneficiary to a child or other family member, or another eligible beneficiary.
However, some divorce settlements may stipulate that there be life insurance in place with the couple’s child or the spouse receiving spousal or child support as the beneficiary. This is so that if the spouse paying the spousal or child support dies, there will be money there to cover those obligations.
Your need for life insurance after divorce
Divorce often turns couples into single parents. As their children’s main caretakers, life insurance can help financially protect them when they’re no longer there to support them by providing money when it’s needed the most to help:
- Cover everyday living expenses
- Settle debts
- Keep the family home
- Fund an education
Even if you no longer have dependants after your divorce, there are still good reasons to need life insurance, including to help:
- Cover debts and final expenses
- Leave a gift to a family member or a charity