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Is insurance important during divorce?

Life Insurance and Divorce are essential to many divorces, especially children are involved. There must be an agreement on whether life insurance needs to be maintained as a provision of the divorce. There are steps you can take to ensure that if benefits need to be paid, they will be paid according to the divorce decree without a lot of disagreement.

Policy Owners

A policy owner has all rights and duties associated with ownership of the policy. This means the policy owner can decide whether to pay premiums, they have the right to designate beneficiaries, to take accelerated death benefits from the policy prior to the insured’s death if diagnosed with a terminal disease, and with policies containing cash value, the right to take policy loans.

However, one party may choose to buy a policy on the other’s life, with consent. The party who wants the policy owns it and pays the premium, while the other party must cooperate with a medical evaluation. Alternatively, a trust can be established and named as the policy owner.


Sometimes, life insurance is part of a settlement to insure a long-term child support and/or alimony obligation. If so, there should be a periodic requirement to show compliance with the provision. This can be part of the settlement agreement or decree. Thus, failing to show compliance can subject the offending party to contempt. Keep in mind that unless a beneficiary is designated as irrevocable, the insurer is not required to inform beneficiaries of any changes to the policy while the insured is alive.

Minors cannot receive the proceeds from a life insurance policy until they are at least age 18 or a court has designated a legal guardian to act on their behalf. Often, the surviving parent will be named as beneficiary to avoid this problem. In some cases, this is the logical way to structure the policy. Another way to handle this is by establishing a trust as the beneficiary. There are different costs associated with this.

Payment of Proceeds

Some people simply cannot be trusted with money. If that’s your former, you may be concerned about how he or she will handle receiving a large sum of money intended to support your children. Most insurers offer settlement options that the policy owner can select prior to the insured’s death, and the beneficiary is not permitted to change how it has been structured.

A review of existing policies is important. Some beneficiaries will likely need to change. An agreement that waives the right to insurance proceeds may not be sufficient. You should actually change the beneficiary designations if you would like to ensure that proceeds go elsewhere.

There are many considerations with life insurance and divorce. For those with children, considering how the policy is structured can help ensure that the policy provides the resources your children need should the policy benefits become payable.

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