How does divorce affect my life insurance policy?
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Asked July 17, 2013
Life insurance policies belong to the person named as the policy owner. During a divorce, life insurance policies would be separated to their respective owners and would not be influenced by the other person. Ownership of the policy is the simple part, though, as the beneficiaries named in different life insurance policies may need to be changed after a divorce.
If your spouse was named as the primary beneficiary in your life insurance policy, you may want to change the beneficiary. In many cases, people divorce and remain on great terms as friends, so it may not always be necessary to change the beneficiary, but in a situation where you are both onward and forging out new lives, you are entitled to add or change beneficiaries as you wish for as long as the policy is in effect.
Your partner does not have a claim to your life insurance policies, unless they have contributed to the premiums over the years. In that case, the court may order the policy to be cashed in, or that the cash value of the policy be reduced by your spouse's share of the contribution. Similarly, though, any loans outstanding against the policy which were used mutually may be shared in responsibility as well, so your significant other may owe you a portion of the loans.
If you are in doubt about a life insurance policy and a divorce, contact your insurance company or consult a financial advisor. Some situations will be more complicated to resolve, especially where children and inheritance concerns are involved. For example, you may be better served to set up a trust fund for the policy to pay into if you die, with regular payments made to your children afterward.
Answered July 17, 2013 by Anonymous