Effect of Divorce on Life Insurance

fairylawOnce a divorce is complete, it is advisable to review the beneficiaries on life insurance policies. This will depend on other factors such as alimony, child support and financial issues in the divorce settlement agreement or ordered by court.

The policy owner is the only person who can change the life insurance policy’s beneficiaries. The owner of the policy is the person who pays the premiums and is not always the insured. For example, a husband can take a life insurance policy on his wife. It should be noted that neither the insured nor the beneficiary can change the designated beneficiary.

In most cases, if there are no children from the marriage and no financial obligations, the policy’s beneficiaries should change immediately after the divorce. If beneficiaries are not changed in the case of death of the insured, the named beneficiaries, in this case the “ex” will receive payment.

If there are financial obligations in the case of alimony, the insured may want to keep the beneficiaries as is. For example, if the ex husband pays alimony to his ex wife, the ex husband may state the same beneficiaries, because in case the ex wife passes, the beneficiaries will still receive monetary security due to her passing.  Clauses could also be written into the policy, which states that until the ex wife/husband remarries or if alimony does not have to be paid, that the beneficiaries will remain the same.