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Navigating life insurance during and after a divorce can be a critical aspect of securing one's financial future. As couples part ways, they often overlook the importance of reassessing their life insurance policies, which may have originally been structured to protect a joint financial future. The way this type of policy may impact your divorce can depend on your particular situation. Read on to learn more about life insurance during and after a divorce.
If you have a life insurance policy, you can maintain it to help provide financial support for your ex-spouse or children. In the event that the plan has a cash value component, it may be considered a marital asset and divided among you and your ex. You may be required to keep your policy if alimony or child support is involved in your divorce. Additionally, in certain situations, you can transfer the policy to your ex.1
Life insurance may be a marital asset, depending on the type of policy you have. If you have a permanent plan like whole or universal life insurance, it’s considered a marital asset since it has a cash value component. Since a term life insurance policy doesn’t come with cash value, it’s not considered a marital asset.2
Your ex-spouse may need to have a life insurance plan and be responsible for paying premiums if you’re awarded custody or alimony. However, if you are able to take ownership of the policy you’ll need to pay the premiums yourself to prevent a lapse in coverage.
Don’t wait until it’s too late. Help cover yourself and your family with coverage from Aflac.
Typically, you can’t keep life insurance on your ex-spouse. This is because many states believe that you don’t have an insurable interest in your ex anymore.1 But if there is an insurable interest because your ex must pay alimony, for example, you might be able to keep the policy. Often, exes have a legal obligation to maintain and pay for life insurance to help cover families that rely on them for financial support.
If you have a life insurance plan and your ex-spouse is listed as your beneficiary, you may want to consider changing your beneficiary designation. In the event you and your ex-spouse don’t have any children, for example, it doesn’t make sense to keep them as a beneficiary. To change your beneficiary, you typically need to contact your life insurance company and submit a change of beneficiary form.
Here’s an overview of a few life insurance issues that can occur with a divorce:1
The policy owner might change the beneficiary but fail to notify the other spouse. They could also stop paying premiums or even allow the policy to lapse on purpose.
Life insurance needs are not set in stone and may change. Depending on the details of the divorce agreement, a spouse may be allowed to reduce the coverage or add a new beneficiary to receive part of the death benefit.
Finances may also change for you and your ex-spouse during a divorce. If the alimony recipient starts to earn far more than the payor, for example, a reallocation of support might be necessary.
If you’re considering buying a new policy after a divorce, consider these options:
Term life insurance from Aflac provides coverage for a set term, which may be 10, 20, or even 30 years. If you pass away before the plan expires, loved ones will receive a death benefit, as long as you’ve paid your premiums.
Aflac whole life insurance is a permanent policy that offers lifelong coverage, meaning it won’t expire for the rest of your life. It usually comes with a cash value component, which grows over time. You can use the cash value to meet various financial goals while you’re alive.
Universal life insurance is another permanent plan that can accumulate cash value. However, it differs from whole life insurance in that you can adjust your premium payments and death benefits as your circumstances change.
Also known as burial insurance or funeral insurance, final expense insurance is essentially a whole life insurance policy that comes with more affordable premiums and a smaller payout. It’s designed to help pay for end-of-life expenses like funeral costs, medical bills, and legal fees.
After a divorce, reassessing life insurance needs becomes crucial for a parent. With shifting financial responsibilities and potentially reduced support, it’s important to ensure you have enough coverage. You should ideally have enough life insurance to cover outstanding debts, such as mortgages or loans, as well as ongoing expenses like childcare, education, and living costs. Additionally, factor in potential future expenses, such as college tuition or medical bills.
One method to figure out how much life insurance coverage you need is to multiply the number of years until your children turn 18 by your annual income. The goal is to provide a safety net for your children, ensuring they can maintain their quality of life even in your absence.
Divorce can affect many aspects of your financial future, including life insurance. Since every divorce is unique, it’s wise to contact a divorce attorney to determine how life insurance may impact the process.
If you decide to apply for a new policy, Aflac offers term life and whole life insurance with rates to fit most budgets. Find out more information by chatting with an agent and getting a quote today.
1 Forbes - How Life Insurance Works During a Divorce. Updated September 12, 2023. https://www.forbes.com/advisor/life-insurance/divorce/. Accessed January 4, 2024.
2 Investopedia - How Life Insurance Works in a Divorce. Updated July 15, 2023. https://www.investopedia.com/articles/personal-finance/112515/how-life-insurance-works-divorce.asp. Accessed January 4, 2024.
Content within this article is provided for general informational purposes and is not provided as tax, legal, health, or financial advice for any person or for any specific situation. Employers, employees, and other individuals should contact their own advisers about their situations. For complete details, including availability and costs of Aflac insurance, please contact your local Aflac agent.
Aflac coverage is underwritten by American Family Life Assurance Company of Columbus. In New York, Aflac coverage is underwritten by American Family Life Assurance Company of New York. 68000 series: In Arkansas, Idaho, Oklahoma & Virginia, Policies: ICC1368100, ICC1368200, ICC1368300, ICC1368400. In Delaware, Policies A68100-A68400. 65000 series: In Virginia, Policies ICC0965JTO & ICC0965JWO. B61000 series: In Arkansas, Idaho, Oklahoma & Virginia, Policies: ICC18B61JWO & ICC18B61JTO. In Delaware, Policies B61JWO, B61JTO. B60000 series: In Arkansas, Idaho, Oklahoma & Virginia, Policies: ICC18B60C10, ICC18B60100, ICC18B60200, ICC18B60300, & ICC18B60400. Q60000 series/Whole: In Arkansas & Delaware, Policy Q60100M. In Idaho, Policy Q60100MID. In Oklahoma, Policy Q60100MOK. Not available in Virginia. Q60000 series/Term: In Delaware, Policies Q60200CM. In Arkansas, Idaho, Oklahoma, Policies ICC18Q60200C, ICC18Q60300C, ICC18Q60400C. Not available in Virginia.
Final Expense insurance coverage is underwritten by Tier One Insurance Company. In California, Tier One Insurance Company does business as Tier One Life Insurance Company (Tier One NAIC 92908). In AR, AZ, ID, OK, OR, PA, TX and VA: Policies ICC21-AFLLBL21 and ICC21-AFLRPL21; and Riders ICC21-AFLABR22, ICC21-AFLADB22, and ICC21-AFLCDR22. Coverage may not be available in all states, including but not limited to DE, ID, NJ, NM, NY or VA. Benefits/premium rates may vary based on state and plan levels. Optional riders may be available at an additional cost. Policies and riders may also contain a waiting period. Refer to the exact policy and rider forms for benefit details, definitions, limitations, and exclusions.
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