Life insurance can play an important role in divorce settlements, especially when alimony, child support or high-value policies are involved. In many cases, a court may require one or both spouses to maintain coverage, purchase a new policy or divide the cash value of an existing one. Here are some key actions and considerations to take with your life insurance plan after divorce:
Life Insurance After Divorce: Everything You Need to Know in 2025
After a divorce, you may need to buy life insurance or update your policy. What happens next depends on your divorce agreement and support obligations.
Find out if you're overpaying for life insurance below.
Select age group
Updated: October 28, 2025
Advertising & Editorial Disclosure
Key Takeaways
Joint life insurance policies may need splitting, surrendering or transferring. Courts may also treat cash value as marital property.
You may need to keep your ex-spouse as beneficiary even if the policy is in your name, especially when required by court order.
Don’t make changes to your beneficiary or policy ownership until your divorce is finalized and your attorney confirms you're legally allowed to.
What to Do with Life Insurance After Divorce
Consult your divorce attorney
Before changing your life insurance policy, consult your divorce attorney about beneficiary rules. They can confirm if you can remove your spouse as a beneficiary or make changes without violating the divorce settlement. Timing and court order compliance matter.
Take inventory of all current insurance policies
List all life insurance policies you and your spouse have, including the type, coverage amount, any riders, cash value and the insurer. This helps with accurate asset accounting in divorce proceedings, especially if cash value is involved. Some states require an Affidavit of Insurance Coverage in the divorce paperwork.
Clarify who pays for the policy
The divorce agreement should specify who pays and maintains life insurance, particularly if the ex-spouse remains the primary beneficiary. Beneficiaries could lose the death benefit if the policy lapses, leaving the surviving spouse without coverage.
Update your coverage
A divorce changes the amount of life insurance you need. Review your policy during and after the divorce to ensure adequate coverage.
If your ex-spouse wants to cover college tuition and you want to ensure car payments are covered, adjust your policy based on the divorce settlement terms.
Consider cashing out
If you have permanent life insurance with cash value, decide whether to keep the policy or cash it out. If you keep the policy, you may need to pay your former spouse their portion of the value. Borrowing against the value or withdrawing from the policy will reduce the death benefit unless it's replaced with additional funds.
Consider changing to a term life policy
Term life insurance is much cheaper than permanent life insurance. Cashing out a permanent life insurance policy and buying term life insurance after divorce may be a better financial decision than maintaining the permanent policy.
You can use the cash surrender value to pay your ex-spouse their portion, invest the money, save it in an account or use it another way.
Remove your ex-spouse as a beneficiary
An ex-spouse can collect life insurance proceeds if they remain the beneficiary. If the policy beneficiary is revocable, you can remove them without consent. If the beneficiary is irrevocable, their agreement is required. If no children are involved, update your beneficiary once the divorce is settled.
Consider maintaining coverage for children
Keeping life insurance on an ex-spouse may be important if you have children together. Both parents should ideally maintain the policy with the ex-spouse as the beneficiary to ensure financial support for their minor children if one parent passes away.
Divorce Requirements by Life Insurance Type
Divorce creates uncertainty about life insurance beneficiaries, policy requirements and cash value treatment, but it doesn't automatically change your existing policy terms. Your life insurance outcomes depend on policy type, ownership structure and whether your divorce agreement includes life insurance for child or spousal support.
- Individual term life insurance: You control all policy decisions unless a court orders otherwise. You may change beneficiaries, cancel or modify coverage. With term life insurance, there is no cash value to divide, and you remain responsible for paying premiums.
- Individual permanent life insurance (whole and universal): You control policy decisions here as well, unless otherwise decreed, permitting you to change beneficiaries, cancel or modify coverage. Cash value for whole life and universal life policies counts as marital property, however, so how you can access it depends on how the court divides or assigns it.
- Joint life insurance policies: Joint policies require mutual agreement for any changes. You can't cancel, modify or make decisions without your ex-spouse's consent or court approval. You may split the policy into two individual policies if your insurer allows, or one spouse can take over sole ownership with proper agreement on premiums and beneficiaries. Cash value division also requires negotiation and may require a court order to resolve disputes.
LEGAL PROCEDURES AND STATE REQUIREMENTS
Divorce and life insurance are governed by a mix of state and federal rules, and the impact on your policy depends on the type of coverage you have.
Employer group life insurance policies under ERISA (Employee Retirement Income Security Act) follow federal law, which overrides state automatic revocation statutes. Even in states where divorce automatically removes an ex-spouse as a beneficiary on most policies, ERISA-covered workplace plans require you to submit a new beneficiary designation form for any change to take effect.
Life Insurance Beneficiaries During Divorce
Your life insurance beneficiary doesn't automatically change when you file for divorce or even when your divorce finalizes. In most states, your ex-spouse remains your beneficiary until you actively update the designation, which means they could receive your death benefit even after your marriage ends.
- Some states have revocation-upon-divorce laws that automatically remove an ex-spouse as beneficiary once the divorce is final, but these laws don't apply if your divorce decree specifically requires you to maintain your ex-spouse as beneficiary for child support or alimony security.
- Change your beneficiary as soon as legally permitted, ideally within 30 to 60 days of your divorce finalization, to prevent your death benefit from going to unintended recipients.
- You cannot change your beneficiary if… your divorce decree requires your ex-spouse to remain listed, if your policy has an irrevocable beneficiary designation or if your ex-spouse owns the policy. Revocable beneficiaries can be changed anytime without permission, but irrevocable beneficiaries require written consent for any changes.
- Avoid naming minor children directly as beneficiaries, as insurance companies won't pay death benefits to minors. Instead, establish a trust, name a custodian under your state's Uniform Transfers to Minors Act or designate a responsible adult trustee to manage proceeds for your children's benefit.
- Review beneficiary designations on all your policies, including employer-provided coverage and older policies you may have forgotten about, and keep confirmation letters from insurers proving you made the changes.
Life Insurance Cash Value Division in Divorce
Permanent life insurance policies with cash value are considered marital property and subject to division during divorce. Courts use several methods to handle cash value:
- Insurers value most permanent policies at their net cash value (cash value plus dividends minus policy loans).
- Surrender charges shouldn't reduce the policy value unless you're actually surrendering the policy.
- Replacement cost may be considered when the insured's health has declined, making new coverage expensive or unavailable.
- Policy Transfer: One spouse takes ownership and compensates the other for their share through other marital assets.
- Policy Splitting: Some insurers allow dividing one policy into two separate, equal policies, though this requires insurer approval.
- Continued Joint Ownership: Keeping the policy active with agreed-upon premium payments and beneficiary structures.
- Tax-Free Transfers: Policy ownership transfers between spouses during divorce remain tax-free in most cases, but complications arise if attempted after divorce is finalized.
- Taxable Situations: Withdrawals above the cost basis (total premiums paid) result in taxable ordinary income. If the policy lapses with outstanding loans, any loan amounts exceeding the cost basis become taxable income. However, policy values should only be reduced for potential taxes if the tax liability is immediate and specific.
Valuation Methods
Division Alternatives to Cashing Out
Rather than surrendering the policy and splitting proceeds, couples have several options:
Tax Implications of Cash Value Division
The tax treatment of life insurance in divorce depends on how the cash value is accessed:
Frequently Asked Questions (FAQs)
Life insurance is an important consideration during a divorce. Answers to these common questions can help you decide what's best for your situation.
Are life insurance proceeds marital property?
Courts don't consider life insurance proceeds as marital property unless the policy has a cash value component accumulated during the marriage, which aligns with life insurance and divorce settlements.
Can you remove an ex-spouse from your life insurance policy?
You can keep life insurance coverage on your ex-spouse after a divorce. If you depend on them financially or have minor children together, it may be wise to maintain coverage. The death benefit proceeds can help continue financial support or assist in caring for your children.
Can you keep life insurance on your ex-spouse after a divorce?
You can keep life insurance coverage on your ex-spouse after a divorce. If you depend on them financially or have minor children together, it may be wise to maintain coverage. The death benefit proceeds can help continue financial support or assist in caring for your children.
Can I get life insurance on my ex-spouse without them knowing?
Obtaining life insurance on an ex-spouse without their knowledge isn't allowed. Consent is required unless a divorce decree mandates it for specific support purposes.
Loading...
Related Articles
About Mandy Sleight
Mandy Sleight is a licensed property, casualty, life and health insurance agent with 20 years of experience in the industry. She has worked for major insurance companies like State Farm and Nationwide, and most recently as the Operations Coordinator for a startup employee benefits company.
Sleight holds a business administration and management degree from the University of Baltimore and a master's in business administration from Southern New Hampshire University. She uses her vast knowledge of insurance and personal finance to create easy-to-understand and engaging content to help readers make smarter choices with their budgets and finances.