How does divorce affect your life insurance policy?

Unfortunately divorce is a sad and inevitable fact of life for many of us, and amid all the (possibly) acrimonious fall-out and (potentially) bitter recriminations some very important things/documentation may get lost in the immediate aftermath. Like, say, your life insurance policy.

Joint life insurance policies often make a deal of sense when you instigate them at the outset of your partnership, however once you split up and divorce you can’t share the existing life insurance agreement.

You see it’s not possible to split a life insurance policy, which essentially means that one party has to take full responsibility for it thereafter, or you must terminate it in its entirety. Either way, this results in one former partner finding themselves without life insurance at this juncture.

Single life insurance policies instead of joint plans are always recommended by insurance experts in case of divorce

But of course your life insurance journey doesn’t end there. It can’t. Especially not if you have any children or others dependant on you in a financial sense as well as all the other ways. And what if – when you eventually move on and find someone new – you need a new mortgage?

Life insurance is strongly recommended (and usually a pre-contractual requirement) in that instance. According to life insurance experts there are any number of policy cover which both parties will need to review in the event of a divorce.

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Take for example if you maintained individual life insurance policies throughout the course of your relationship. As a married person the chances are that your spouse, and where applicable, your offspring would have been the main beneficiaries of any existing life insurance policy solely taken out in your name.

Obviously the likelihood is those contractual terms and conditions will be subject to change on your part, and in future be geared up around your children as sole benefactors; although should you re-marry or enter into a civil partnership with someone new at a later date, then you may wish to pencil them into your new-look policy too.

Staying on the subject of dependants, and you may need to determine whether or not the level of coverage outlined in your post-divorced life insurance policy is still adequately measured for the needs of your loved ones. Think about it for a minute. If you agreed to a lower level of coverage when you were first married – the thought process being something along the lines that your partner would still be around in terms of your family being financially secure in the unfortunate event of your demise – then this would now need to be altered accordingly.

Dramatically so if you were to assume the role of sole provider for the kids in the aftermath of a breakdown in a relationship, which would necessitate a much higher level of life insurance cover to protect the financial interests of your children going forward.

New conditions, often centering around dependants, have to be underwritten into future life insurance policies

Also worth pointing out that some life insurance plans may have accrued cash values, and will therefore need to be included as part of the divorce settlement much in the same manner that other joint investments will be. As far as solicitors are concerned any proceeds from the joint life insurance policy will form part of the joint assets of the divorcing couple and therefore should be declared and dealt with according to the law in the split.

However, whenever and why ever the situation arises, all life insurance experts agree that it’s imperative that the un-coupling (to coin a very modern phrase) couple utilize the ‘separation option’ on their joint policy, if it’s in place; although not all plans have this.

Having said that, you’re still urged to be mindful of other outstanding criteria which needs to be fulfilled in the medium to long-term surrounding the whole ‘moving on’ aspect. It’s predominantly for these very reasons that it’s always prudent for recent divorcees to revisit their existing life insurance policies (joint or otherwise) to ensure that any necessary revisions and long-term amendments are put into legally binding and documented practice.

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