Life insurance after divorce

According to the Office of National Statistics (ONS), 42% of marriages in England and Wales unfortunately end in divorce. When this happens, there’s a lot to figure out – one of these things is what do to if you have a joint life insurance policy. We looked at the options and how you can keep your cover with minimum upset.

Life insurance and divorce

Divorce can be both emotionally and financially draining. Having to split all your assets and discuss custody of the kids is not an easy process. As part of this, you will need to untangle your life insurance cover and make the necessary changes following the shift in your circumstances.

If you have single life insurance policies, this shouldn’t be too complicated. You will mainly just need to adjust your cover levels and your policy’s beneficiaries if they include your ex-spouse. If your policy is tied to your mortgage, there might be a few more steps involved.

If you have a joint policy, it will be a little more difficult to make the changes, but it can be done without too much hassle.

What should you do if you have different life insurance policies?

If you and your ex-partner hold different life insurance policies, then making the changes following a divorce shouldn’t be too difficult.

The most important thing to do will be changing the main beneficiary on the policy, which is likely to be your ex. If you share children, you may want to keep him or her named on the policy, but this will be up to you. You can fill up a change of beneficiary form to make the changes – contact your insurer for details.

You’ll generally also need change the terms of your will, or if your life insurance policy is part of a trust, the terms of a trust.

Your partner may choose to take out a new life insurance policy or update their cover to include the income they receive from you as part of maintenance payments.

What should you do with joint life insurance after divorce?

Married couples often take out this type of cover, though taking out individual policies is usually recommended.

If you and your partner share a joint life insurance policy, things can be a little more complicated if you split up. While the cover tends to be cheaper, the policy tends to be inflexible when it comes to changes in circumstances.

Some insurance companies will allow you to split the policy, so check with your insurer in the first instance to see if this is possible.

If not, the two other options available to you are to cancel the policy or have one of the partners take over it, and the other take out a new policy.

Bear in mind that there will probably be fees and penalties for cancelling the policy and you may not recoup all the premiums you paid in. When you take out a new policy, this is likely to be more expensive, as you are older.

If you decide for one partner to take over the policy, you will need to fill out a legal document, signed by both partners, which needs to be filed with the insurance company. Before you do this, you should check whether this will be better financially by comparing the cost of one of the partners paying for the joint policy themselves vs taking out a new policy as an older single person.

What should you do if you have mortgage life insurance?

Many mortgage lenders require you to take out a mortgage life insurance policy in order to secure the loan. If you’re getting a joint mortgage, your policy is likely to also be a joint one.

What you do with the policy depends on what you decide to do with the property:

• If you sell the house, you will need to cancel the policy as it will no longer be viable.
• If one partner takes over the property and buys the other out, you might still need to cancel the policy and take out a new one to reflect the new financial situation. You can keep the existing policy, but make sure the payout still covers the mortgage in case you die.
• If you decide to keep joint possession of the house, maybe so that the children can remain in it, and you keep paying the mortgage together, you may want to keep the policy as it is.

Is life insurance still valid after divorce?

Yes. If you make no changes to the policy, it will carry on as is. This means that, if your ex-partner is named as the main beneficiary on the policy, he or she will still get the payout if you die.

If this is not something you would be happy with, you can change the policy beneficiary or cancel the policy and take out a new one, as explained above.

Making a life insurance claim after a divorce

If your ex-partner dies and you are still named as a beneficiary on their life insurance policy, you are entitled to a payout. Similarly, if you still share a joint life insurance policy, you should get the payout.

If your partner has a single life insurance policy and you are not named as a beneficiary, then you are not entitled to a payout, even if your partner dies before the divorce is complete.

Note that a life insurance policy cannot be split in a will or any other legal document, with the exception of a policy that has been written in trust.

Frequently asked questions

• How do I update my will?

  The best way to do this is to contact your solicitor or the firm through which you took the will out.

• How to change my life insurance policy after a divorce?

  You are not obligated to tell your insurer you are getting a divorce, but you should contact the company if you wish to make changes to named beneficiaries, the payout amount or cancel the policy altogether.

  This will usually involve filling out different forms and may incur admin fees or penalty charges.

• Do I need my partner's consent to cancel a joint policy?

  In most cases, you won’t need your partner’s consent to cancel the policy, but it’s best to check with your insurance company to make sure.

  If you want to take over the policy, both your and your partner will need to sign the transfer form.

• How is life insurance handled after divorce?

  This depends on the type of policy you have and what you decide to do with it.

  If you have individual policies, they will continue to operate as they always have. You can remove each other as named beneficiaries from the policies, and the money will go to the other people named.

  For a joint policy, you will have to split it, if the insurer allows this, in which case the policies will become individual policies. Or, if one of you takes over the policy, it will also act like an individual policy for that person. The only other option is to cancel the policy altogether.

  For mortgage policies, if you keep a joint policy because you are both keeping possessions of the house, the money will be paid when the first one of you dies and used to cover the mortgage. Whatever’s left will go to whoever’s named as the beneficiary on the policy.

• Is life insurance considered marital property?

  Term life insurance policies are considered individual property, even if they were purchased during the marriage.

  Life assurance policies, also known as hole life policies, are generally considered marital property, and the cash surrender value is subject to equitable distribution.

• How long can a spouse stay on insurance after a divorce?

  This depends on you. If you wish, you can keep your ex-spouse named on the policy indefinitely. This is sometimes done in case there are children involved, especially if one partner is paying maintenance.

• Does my spouse have to be my life insurance beneficiary?

  No. If you have an individual policy, you can name whoever you want as a beneficiary.

• Can you take out life insurance for an ex partner?

  If you have an “insurable interest”, such as maintenance payments, then yes. You will have to get their consent to do this though.