Life insurance is a difficult enough topic for most people to wrap their heads around, but when life insurance is included as a decree in a divorce, things can get much more complicated.
This article will detail everything we understand about divorce and life insurance. However, every state has different laws - so some information may not apply to you.
In most divorces, especially among couples that have children together, it is very common that a stipulation is made which requires the supporting spouse to carry a life insurance policy (In most states). This guarantees that the children and other spouse will be provided for, even in the event of their death.
The length of the policy is usually dependent on what the policy was originally meant for. If it is meant simply as a means to cover child support costs, the plan may terminate once all children reach the age of majority.
A life insurance plan can also be extended for much longer, depending on the particular needs of each couple. When life insurance is required to guarantee alimony, it can go for as long as alimony payments are still required.
The most important part about taking out life insurance for divorce decrees, is who will be the owner of the policy.
The owner has full control over the policy and is able to name beneficiaries as they see fit. A common way to make sure are stipulations are upheld is to name the custodial parent as the owner of the policy.
It is also possible to include provisions in the divorce agreement that state if the beneficiary is changed or the policy is allowed to lapse, the other spouse or the children would be entitled to a portion of the estate equal in value to the death benefit.
All of the matters regarding life insurance for divorce are highly dependent on the situation at hand, which is why we are including a Q & A section that will hopefully address many of the questions people might have.
Can I require my spouse to carry a life insurance policy for my child as part of the divorce?
Yes (In most states). As a part of the child support section of your divorce case, you can order your spouse to provide life insurance in a certain amount with your child named as the beneficiary. It can also be common to buy life insurance with you named as the beneficiary as a part of the alimony or spousal support sections of your divorce case.
What happens if my spouse changed the beneficiary before the divorce was final. Are they allowed to do this?
If they are the owner of the policy, and there is no court order stipulating that he must include you or anyone else as a beneficiary, there is nothing stopping them from changing the beneficiary.
If you are still going through the divorce process, make sure you stipulate that you need to be included as the beneficiary as a part of the agreement. If this is a court order, your ex-spouse will have no choice but to comply or go to jail.
If the divorce has already gone through without you stipulating the need to keep you on as a beneficiary, you can try to amend the divorce decree with life insurance as a stipulation.
Is it considered fraud to change the beneficiary on a life insurance policy as a reaction to a divorce filing?
If there is no stipulation stating that you or your children need to be named as a beneficiary, then there is no fraud taking place if they decide to take you or your children off the policy as beneficiaries.
The good news, is that if the divorce papers have just been served, there is still plenty of time to add a stipulation to the divorce decree stating that you or your child must be named as a beneficiary.
Can a divorce be modified to include a life insurance provision?
If your current court order does not include this, it would require you going back into court to ask for the modification. Be prepared to prove why this stipulation is necessary now, when you let the divorce go through without it previously.
Can I be required to pay the premiums on my ex-spouse’s life insurance policy?
Some ex-spouses will demand that the other party pay for the life insurance premiums, as they feel they will be the ones benefitting from their death. This is not how the system works though, so if someone is trying to make you pay their premiums, don’t stand for it!
It's standard practice for the court to order a person paying alimony to also maintain a life insurance policy naming the alimony recipient as beneficiary. This acts as basically another form of alimony.
What can I do if my ex-spouse is not complying with the court order regarding a life insurance policy?
If your ex-spouse is not complying with the court order regarding life insurance, they are breaking the law. You can take legal action against your ex-spouse for this, and you should too. Contact an attorney to find out how to get what is yours.
What if my ex-spouse drops their policy and then becomes terminally ill and is uninsurable?
If you were unable to take them to court before they become terminally ill, not all hope is lost. You will still need to go to court, but it is most likely you will be paid in assets and not in the form of life insurance which your ex-spouse will be unable to obtain.
How will the life insurance policy be affected if my spouse has another baby?
If the court order states that your ex-spouse must keep you or your children as beneficiaries, this holds true even if they have another child with a new partner. The new children would not be entitled to any proceeds of a policy which name your children as beneficiaries.
My husband and I divorced 7 years ago and he just died. There was nothing stipulated in the divorce decree. Am I entitled to anything?
No, not being married anymore, there is no longer any insurable interest. There are a few exceptions however, so if you feel you are really entitled to something, you should consult with an attorney.
If I am named as the beneficiary, can the life insurance payout be challenged when the owner dies, such as by our children?
Life insurance goes to the beneficiary, it is completely exclusive of the estate law and whatever may be in place there.
Can the life insurance beneficiary be controlled by the will?
Life insurance is not distributed by a will and it can only be changed by changing the beneficiary on the policy. This means even if the will is to change, you are still entitled to anything you are stated as a beneficiary for.
Can life insurance payouts my ex-spouse received (from a parent) be divided up in a divorce?
Unless you were named as a beneficiary on the life insurance policy your ex-spouse collected on, then you are not entitled to any of the money and it will not be divisible in a divorce.
Can the beneficiary be changed even if the divorce decree states it may not be changed?
While the divorce decree prohibits the beneficiary from being changed, that won’t stop some people from trying. In situations like this, you need to have your attorney contact theirs, or take them back to court immediately.
My ex-spouse says I can’t be a beneficiary on his life insurance policy because it is through his work. What can I do about this?
That may not be true, but even if it is, he can still take out another policy naming you as the beneficiary. This is very common to do as a part of the alimony plan.
Can my ex-spouse take out a life insurance policy on our child even though we are already divorced and nothing was stipulated in the divorce decree?
A minor child is seen as an insurable interest by insurance companies, and a parent has every right to take out a life insurance policy on them at anytime, regardless of the divorce.
My ex-husband just passed and it was just discovered that he borrowed against his life insurance policy and still owes a large sum of money. Am I responsible for this debt?
No, your ex-husband’s estate would be liable.
I have been reading and discovered that if my ex-spouse declares bankruptcy, alimony payments are not dischargeable. Is the same true for the life insurance obligation?
You should consult with an attorney, but generally if the life insurance is designated as alimony then it is not dischargeable either.
Lastly, if you've gone through a divorce and there's no life insurance requirements - make sure you change the beneficiary on your life insurance policy immediately! The Supreme Court just ruled in favor of an ex-spouse over a widow in a battle for life insurance proceeds just because the deceased didn't change his beneficiary.
Quite a lot of information there, but hopefully there is something in there to answer the many questions most people have about divorce or obtaining life insurance after divorce.
We know we won’t be able to cover absolutely every situation, so if there are things you are still confused about, please don’t hesitate to reach out to us if you're in the market for buying life insurance for a divorce decree. We are always happy to help people to better understand their own life insurance situation.