When a couple divorces, there are a lot of things to figure out. From “Who gets the house?” to how to divide up the furniture, one thing that often gets overlooked is life insurance.
What is the significance of life insurance?
If you have young children, your ex-spouse is likely the person who would be financially responsible for them if you were to die. If something happened to you, and your ex also dies or becomes unable to assume custody, your kids could end up in foster care or with relatives who may not be able to provide for them. That’s why it’s important to have life insurance.
If you have a spouse who doesn’t work, or if they earn very little, your life insurance policy could be used to help them maintain their standard of living if you died. It can also provide peace of mind for your ex-spouse, knowing that they will be able to afford to take care of your children if something happens to you.
What happens to your life insurance in a divorce?
In most cases, your life insurance policy will be included in the property division portion of your divorce settlement. This means that it will be up to you and your ex-spouse to decide who will be the policyholder and beneficiary.
One thing to keep in mind is that if your ex-spouse gets listed as the beneficiary on your life insurance policy, they will receive the payout if you die – regardless of whether or not they are still your beneficiary in your will.
Updating your life insurance policy after a divorce
Once your divorce gets finalized, it’s important to update your life insurance policy. This includes changing the beneficiary on your policy to reflect your new marital status. If you have young children, you may want to consider listing them as beneficiaries on your life insurance policy. Failing to update your policy could mean that your ex-spouse or someone else you didn’t intend to receive the payout could end up getting the money.
If you’re getting divorced, it’s important to take into account what will happen to your life insurance policy. If you’re getting divorced and have life insurance, make sure you understand how the divorce can affect your policy and take steps to make sure that your life insurance policy reflects your changed circumstances.