Getting Divorced? Check Your Life Insurance

When your life circumstances change, so do your insurance needs. Take some time early in the divorce process to review your life insurance policies to see if they still meet your needs. You may find that you need MORE coverage at this time, rather than less.

If you have children, it’s likely that the continuation of an insurance policy will be something that is specified in your divorce decree. You will want to ensure their care until they graduate from high school. You will likely want the other parent to do the same. You may want your insurance to provide the financial support you would have given them to attend college.

Your insurance agent can advise you on the amount of coverage you may want for these purposes, given the current ages of your children.

If your children are underage, you can name them as a beneficiary but they will not be able to manage the money from your policy. You will want to name an adult who can manage the money for them. Who do you trust with this task? Will that person charge a fee – taking money away from your intended beneficiaries? How inconvenient will it be for the custodial parent to get the money needed to purchase things on your children’s behalf?

If your life insurance policy has accrued a cash value, that may be considered a marital asset that could be divided into the property settlement agreement. This can be challenging as most insurance policies will either terminate upon removal of cash or be reduced by the amount of the cash taken as a “loan.” If the full amount of insurance is the amount needed, it may be better to offset the imbalance through an unequal distribution of some other marital property.

While you may be happy at the prospect of your ex-spouse’s name being removed from your life insurance policy, that may need to wait for another day.

Source:, “Changes to Auto Insurance, Other Insurance After Divorce,” October 2009.