Divorce is a challenging life event that involves numerous financial and legal decisions. One such decision is determining the fate of a joint life insurance policy. Understanding how divorce life insurance policies are treated during a divorce is crucial for protecting both parties’ interests. Understanding what happens to a joint life insurance policy during a divorce and the related key considerations can help you navigate this complex situation more effectively.
What happens to a joint life insurance policy during divorce?
Joint life insurance policies are designed to cover two people, typically spouses, under one policy. In the event of a divorce, the handling of such policies can vary based on several factors including the policy terms and the divorce settlement agreement. Here are some common scenarios:
Policy Cancellation: One option is to cancel the joint policy altogether. This might be the case if both parties agree they no longer need the cover, or want to be insured on a policy with the other spouse.
Maintaining the Policy: Couples may decide to keep the joint life insurance policy even despite the divorce. This is more common with second-to-die policies, especially if other dependents benefit from the eventual death benefit. In this scenario, both parties would need to agree on how to handle premium payments and designate beneficiaries appropriately. If both parties have child dependents, they may decide maintaining the policy is the best way to proceed. However, the need for additional cover to protect new liabilities after divorce should also be considered.
Converting or Splitting the Policy: Some insurers offer the option to convert a joint life insurance policy into two individual policies. This can be a practical solution, allowing each person to maintain their own coverage independently. However, this process may come with additional costs and potential underwriting requirements.
Can I remove my ex-spouse as a beneficiary from our joint life insurance policy?
Yes, you can typically remove your ex-spouse as a beneficiary from your joint life insurance policy, but the process can vary depending on the policy’s terms. It’s essential to review your policy documents and consult with us to discuss the specific steps required.
Considering individual insurance policies during divorce
Considering individual life insurance policies during a divorce is a crucial aspect that can significantly impact the financial security of both parties and their dependents. During the division of assets, it is essential to review and possibly adjust individual life insurance policies to ensure that they align with your new financial responsibilities and future needs.
Divorce life insurance with a mortgage policy
Divorcing with a mortgage life insurance policy can add complexity to the separation process. It may be, for example, that life insurance was put in place so that in the event of one partner’s death the mortgage is paid off in order to provide financial security for the surviving spouse. During a divorce, decisions must be made about altering or terminating an existing policy. The policyholder may need to be removed, or new policies might be required if both parties retain an interest in the property. Our expert advisers will assist you through the options about your next steps.
Changing your life insurance policy with us
Changing your life insurance policy during a divorce can be complex, but we’re here to help. Our expert team offers personalised support in relation to discussing divorce life insurance policies, beneficiaries and cover. We’ll guide you through the process at this difficult time and help you put in place plans for the future. Contact us today to learn more about how we can assist you.