Life Insurance After a Divorce: Everything You Need to Know


When you own life insurance and get divorced, it might require court-ordered life insurance changes. For instance, you may be required to keep life insurance on an ex-spouse, continue to list them as a beneficiary or buy a policy to cover the former spouse. If you have permanent life insurance, the settlement may require you to share part of the cash value with your ex.

If there’s no alimony or child support requirement, consider updating your beneficiary to someone other than your ex-spouse. Regardless of the changes a divorce causes, nothing will happen automatically. You must complete all updates and changes yourself and ensure they satisfy the terms of a court-ordered divorce life insurance agreement, if applicable.

Table of Contents

Key Takeaways

blueCheck icon

When you divorce, you might have to keep life insurance in place, buy life insurance or split cash value life insurance with your ex-spouse.

blueCheck icon

Consult your divorce attorney before making changes, clarify in writing who should pay and consider keeping coverage after a divorce if you have minor children together.

blueCheck icon

If you rely on your ex-spouse for financial support or have minor children together, keeping life insurance on your former spouse may be in your best interest.

Life Insurance During and After a Divorce

If you’re in the middle of a divorce, it’s a good idea to avoid changing your life insurance until after the divorce. As part of the divorce agreement, the judge may order you to keep coverage in place, buy life insurance to protect alimony and child support payments or divide the cash value into a permanent life policy.

The type of life insurance you have and the outcome of your divorce settlement matter when making changes to life insurance after a divorce, as outlined below.

    signupBonus icon

    You may be required to keep coverage

    Suppose a divorce agreement requires one spouse to make child support or alimony payments. In that case, the opposing attorney might also require them to keep a life insurance policy in force and list the ex-spouse as the primary beneficiary. This is usually mandated so that if something happens to the paying spouse during their payment agreement, the surviving spouse can still maintain their lifestyle and provide financial support to their minor children.

    businessLoan icon

    If you aren’t covered, you may be required to get coverage

    If you don’t currently have life insurance and are mandated to pay child or alimony support, you could be required to buy court-ordered life insurance after divorce. The court order may require only the paying spouse or both spouses to purchase and keep life insurance with the ex-spouse as the beneficiary. Even if you’re mandated to buy life insurance, you get to decide which type of life insurance you buy, as long as you have a minimum amount to cover support payments.

    loanPro icon

    Cash value is divided between spouses

    Some life insurance policies have cash value, which becomes part of the marital property or estate. The couple or judge will determine how to divide the cash value between the former spouses as part of the divorce agreement.

    Permanent life insurance includes a cash value account, similar to a savings account. The cash value will grow over time, and you can borrow against or withdraw from this value if you decide to surrender or cancel the policy. How you divide the cash value may depend on the cash value amount and division requirement.

Navigating life insurance during and after a divorce requires careful planning and adherence to legal obligations. Whether you maintain existing policies, acquire new life insurance to protect alimony and cover child support or divide a policy's cash value, your decisions will have lasting implications for your financial security and that of your dependents.

bookshelves icon
MONEYGEEK DICTIONARY

An asset is something someone owns with economic value, and they expect to have a future benefit that is convertible to cash. Examples of assets people can own include real estate, bank accounts, investment accounts and cash value in life insurance.

A marital asset includes any property the couple acquires together during marriage. This could be the couple's home, investment properties or accounts, pensions, stocks, cars and life insurance cash value. Anything acquired before the marriage is considered a premarital asset. You can regard the value increase during the marriage as part of the marital assets during a divorce.

Common Life Insurance Problems During and After a Divorce

Several issues can arise during a divorce that may disrupt your financial planning and lead to legal challenges. These may include the following:

  • Beneficiary Disputes: One of the most common issues is disagreements over who should be the policy's beneficiary, especially if children are involved. Life insurance beneficiary changes after divorce often require careful consideration to ensure they comply with legal mandates and reflect the intentions of both parties.
  • Policy Ownership Conflicts: Determining who gets to keep the life insurance after divorce or how you should divide it can become a contentious issue for joint policies.
  • Missed Premium Payments: During the upheaval of divorce, it's easy to overlook premium payments, leading to policy lapse and loss of coverage. Managing life insurance after divorce involves maintaining payment schedules to avoid such pitfalls.
  • Overlooking Cash Value: In policies like whole or universal life insurance, the cash value is often forgotten or underestimated during asset division.
  • Failure to Update Policies: Many people forget to update their life insurance policies post-divorce, leading to unintended beneficiaries.
  • Tax Implications: If you cash out a life insurance policy with a significant cash value, the amount that exceeds your total premiums could be considered taxable income. Similarly, dividing a joint policy's cash value during a divorce may incur taxes for both parties. You may consult a tax advisor for personalized guidance.
  • Legal Costs: Divorce and life insurance conflicts can lead to legal battles, adding to financial strain and emotional stress.

Awareness of these common problems can help you proactively mitigate life insurance and divorce complications, ensuring your financial strategy remains solid through and beyond the divorce process.

What Happens to Your Life Insurance After a Divorce?

What happens to your life insurance after divorce largely depends on whether you have individual or joint life insurance.

If You Have an Individual Life Insurance
  • Beneficiary Changes: The most immediate action is to review and possibly update the beneficiary designation. If your ex-spouse is the beneficiary, you may want to change it unless court-ordered otherwise.
  • Policy Ownership: If you own the policy, you can make any changes you see fit, including canceling it. However, if you're paying alimony or child support, you may be required to keep the policy active.
  • Cash Value: If your policy has a cash value component, like whole or universal life insurance, it may be considered a marital asset. This means the cash value might be subject to division during the divorce settlement.
  • Premium Payments: Ensure that premium payments continue to be made on time, especially if the policy secures alimony or child support payments.
  • Consult Legal Advice: Given that life insurance can be a part of divorce settlements or court orders, consult your attorney to understand any legal obligations or restrictions you may have regarding your policy.
If You Have a Joint Life Insurance
  • Separation into Two Policies: Some insurance providers allow you to split joint policies into two individual policies. This process is often the cleanest way to separate life insurance during a divorce.
  • Transfer of Ownership: One spouse can take over the policy, becoming the sole owner and payer of premiums. The cash value, if any, would then belong to the owning spouse.
  • Cash Out the Policy: If both parties agree, the policy can be surrendered for its cash value, which can then be divided as agreed upon or as ordered by the court.
  • Maintain the Policy: In some cases, especially where children are involved, both parties may decide to keep the joint policy active. This option requires a clear agreement on premium payments and beneficiary arrangements.
  • Legal Consultation: Joint policies often involve more legal intricacies. Consult your attorney to understand the legal implications of any joint life insurance policy changes.

Understanding these nuances is critical to making informed decisions during a transitional life phase, ensuring your life insurance after divorce aligns with your evolving circumstances.

What to Do About Your Life Insurance Policy After a Divorce

After a divorce, you should make a point to update your life insurance policy, as it won't happen automatically. Depending on your court-ordered life insurance beneficiary rules after divorce, you may wish to remove your spouse from your life insurance as a beneficiary.

Multiple scenarios could surface during and after a divorce with a life insurance policy. Below are steps policyholders should consider when going through a divorce and changes you may need after a divorce.

    businessOwner icon

    Consult your divorce attorney

    Before you change your life insurance policy, consult your divorce attorney. Ask about whether you can remove your spouse from my life insurance or change your life insurance beneficiary before updating your policy. You don't want to cause any issues with an impending divorce or breach a divorce settlement after you finalize it.

    loanReview icon

    Take inventory of all current insurance policies

    List all existing life insurance policies you and your spouse have. This list should include the type of life insurance, your coverage, any riders included, the cash value amount and the company the policy is with. This list can help with divorce proceedings to ensure correct asset accounting, especially if cash value is involved. Some states require each spouse to provide an Affidavit of Insurance Coverage as part of the divorce paperwork.

    giveMoney icon

    Clarify who pays for the policy

    The divorce agreement should clarify who pays and maintains life insurance, especially if the former spouse will remain the policy's primary beneficiary. If the life insurance lapses, it could be detrimental to the beneficiaries if the insured dies, as there would be no death benefit available to the surviving spouse as the beneficiary.

    money2 icon

    Update your coverage

    A divorce can lead to significant changes in the amount of life insurance you need to keep in place. Review your policy carefully during and after divorce to ensure you’re covered, and update your coverage if needed. If your ex-spouse wants to cover college tuition for your shared children and you want to ensure car payments are covered after death, for example, you might need more coverage if your existing policy isn’t sufficient.

    wage icon

    Consider cashing out

    If you have permanent life insurance with cash value, you should consider whether keeping the policy is best or if cashing it out might make more sense. If you keep the policy in force, you may need to pay your former spouse their portion of the value as part of the divorce settlement. Although you can take a loan against the value or withdraw from it, the amount will lower the death benefit if you die and haven’t replaced the cash value amount, plus interest.

    clock icon

    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 instead may be a better financial decision than keeping the permanent policy in place. You can use the cash surrender value to pay your ex-spouse their portion, invest it, save it in an account or use it another way.

    uninsured icon

    Remove your ex-spouse as a beneficiary

    An ex-spouse can collect life insurance proceeds if you don’t remove them as a beneficiary. As long as your policy beneficiary is revocable, you can remove your ex-spouse from your life insurance policy, even if they don’t consent to the change. The beneficiary has to agree to removal if the policy has an irrevocable beneficiary clause. When no children are involved, it may be a good idea to update your beneficiary as soon as you settle the divorce.

    insurance2 icon

    Consider maintaining coverage for children

    If you have children together, keeping life insurance on an ex-spouse after divorce might be best. Ideally, both parents should keep life insurance with the ex-spouse listed as the beneficiary. This can ensure that as long as your children are minors, they will be financially taken care of if one of their parents dies.

Removing Your Ex-Spouse From Your Life Insurance Policy

You may be able to remove your ex-spouse as a beneficiary of your life insurance policy. It depends on the court-ordered divorce agreement's terms and conditions. For example, you may want a requirement for both spouses to keep life insurance on the ex-spouse so they can care for minor children in the event of one parent's death.

Whether you can remove an ex-spouse as a beneficiary depends on the type of beneficiary they are. You can change a revocable beneficiary without getting permission or consent from the existing beneficiary. For example, you might name a parent or sibling as beneficiary while single but change it to your spouse or child after you get married.

If you have an irrevocable beneficiary, the life insurance company will require you to get consent from the existing beneficiary before making the change. Parents often name their children or a trust as irrevocable beneficiaries. If your ex-spouse is an irrevocable beneficiary on your policy, they have to give permission for you to change the designation.

When You Should Have Life Insurance on an Ex-Spouse

If you rely on your ex-spouse for financial support, you should consider keeping life insurance on your ex-spouse.

Below are a few scenarios when keeping life insurance on a former spouse might make sense. Learn more about how to buy life insurance on your ex-spouse and circumstances when it makes sense.

    shakingHands icon

    They consent

    To buy life insurance on an ex-spouse, you must have consent from them as they will be the insured person. If they don’t consent, you cannot buy insurance on their life unless mandated by a settlement.

    cashCard icon

    You rely on them for financial support

    If your ex-spouse is mandated to pay you alimony or child support as part of the divorce agreement, you may want to require that they maintain life insurance on themselves with you as the beneficiary. If they were to die before the support payments expire, you can use the life insurance death benefit as payment for the support you would lose if you didn't have child support or alimony life insurance.

    studentWithALoan icon

    You have children

    If you and your ex-spouse have children together, it may be wise to maintain life insurance on each other with the other spouse listed as the beneficiary. The coverage would replace any financial support they provide if they pass away (or vice versa), allow your children to maintain the lifestyle to which they are accustomed and cover education expenses.

Understanding these nuances helps clarify when life insurance after divorce, particularly life insurance on an ex-spouse, is not just beneficial but potentially essential for financial stability.

dollarBadge icon
MONEYGEEK EXPERT TIP

If you need to buy life insurance during or after a divorce, it’s usually better to buy a term life policy and invest the difference of a more expensive permanent life insurance policy. Term life insurance covers up to 30 years, which is usually enough to satisfy a divorce agreement. MoneyGeek analyzed some of the best term life insurance companies to help you shop and compare companies, policies and rates.

How Much Life Insurance a Divorced Parent Needs

The life insurance coverage a divorced parent needs depends on their situation. Start by considering how many years you’ll be paying child support by subtracting your youngest child’s current age from the age the child will be when you no longer need to provide financial support. Calculate the total payments for alimony and child support per year, add in any extras like education costs, and then multiply that number by the number of years of support. This calculation can give you an idea of how much life insurance you might need.

Consider other debts you might want to cover with life insurance, like car payments, student loans, your child’s college expenses or a mortgage. If you cover more than support payments, consider how you want your death benefit divided. If you don’t want a single beneficiary to get the entire sum, designate more than one primary beneficiary. It might also be a good idea to include a contingent beneficiary in case the primary beneficiary can’t be located or dies before you.

smallCalculator icon
RULE OF THUMB

There is more than one way to determine how much life insurance coverage divorced parents need. This formula uses the age of your youngest child and your annual income to determine the minimum recommended amount of coverage.

Recommended Minimum Coverage = Annual Income × (18 - Age of Youngest Child)

Using this formula, you first subtract the age of your youngest child from 18 (the age at which they'll no longer legally need support). Then, multiply that figure by your annual income.

This general rule of thumb is useful because it covers your income until your youngest child is financially independent. If you choose a term life insurance policy that lasts until they turn 18, it serves its purpose once they reach 18 if you haven't died, or it will provide a death benefit to replace your income if you die before they turn 18.

Let's say your annual income is $65,000, and your youngest child is three. As a divorced parent, you want to ensure your ex-spouse can afford to care for your children without financial difficulty if you pass away. Using the formula above, you'd have to cover at least 15 years of your annual income. The minimum recommended coverage amount is $975,000 on a 15-year term life insurance policy.

Finding the Right Type of Life Insurance After a Divorce

1
Assess Your Financial Obligations

Think about your financial responsibilities. Consider alimony, child support, debts and any other obligations that would impact your loved ones if you were no longer around.

2
Determine the Coverage Amount

Calculate the amount of coverage you'll need based on your financial assessment. This should be enough to cover your financial obligations and provide a safety net for your dependents.

3
Choose the Right Policy Type

Decide between term, whole or universal life insurance based on your needs. Term life is often sufficient and more affordable, but whole or universal life can offer additional benefits like cash value. There are also other types of life insurance policies catering to different needs. Your choice should also align with both your life insurance requirements after divorce and future goals.

4
Shop Around for Quotes

Compare rates from different providers to ensure you're getting the best deal. Online comparison tools can be particularly helpful in finding suitable life insurance after divorce.

5
Review the Policy Terms

Read the fine print carefully. Before committing to a policy, ensure you understand the terms, including any exclusions or limitations.

6
Consult Professionals

Before finalizing your decision, you may consult with financial advisors and legal professionals to ensure the policy meets your needs and complies with any court orders or legal obligations.

7
Make the Purchase

Once you're confident in your choice, go ahead and make the purchase. Keep all relevant documentation in a safe place and inform your beneficiaries about the policy.

Compare Life Insurance Rates

Ensure you're getting the best rate for your life insurance. Compare quotes from the top insurance companies.

FAQ About Life Insurance After a Divorce

Life insurance is an important factor spouses should consider during a divorce. Answers to these common questions about divorce life insurance may help you decide what’s best for your situation.

Are life insurance proceeds marital property?
What happens to life insurance in divorce?
Can you remove your ex-spouse from your life insurance policy?
Can you keep life insurance on your ex-spouse after a divorce?
What should you do about your life insurance policy after a divorce?
How much life insurance does a divorced parent need?
Can I get life insurance on my ex-husband without him knowing?
Can you still collect life insurance benefits on an ex-spouse?
Can an ex-wife be a beneficiary on a life insurance policy?
Loading...

Read More About Life Insurance

About Mandy Sleight


Mandy Sleight headshot

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.