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How To Manage Life Insurance Before, During, and After a Divorce

How To Manage Life Insurance Before, During, and After a Divorce

Divorce can be very distressing for any family. Aside from carrying the emotional weight of ending what was once a “dream come true”, a couple has to go through custody issues, splitting properties, and other financial woes. And because of these tricky procedural matters, one factor in divorce is often overlooked – life insurance.

Couples purchase life insurance to ensure the family’s financial stability should any of the parents’ experience health-threatening issues, disability, or death. Without life insurance, the family left behind will suffer financial uncertainties including normal monthly bills, medical emergencies, and schooling.  Especially when children are minors, they need the utmost support they can get. Responsible parents acquire insurance policies because they are vital. Parents will be able to meet their financial commitments with the help of life insurance should one parent succumb to unexpected death.

Life insurance should be a part of marital conversations, but what happens when a marriage ends in divorce?

Life insurance and divorce are important matters to thoughtfully resolve. For divorcing couples without children, it will be helpful for the newly single to learn how life insurance will be changed when undergoing the divorce process as part of dividing the assets and properties and cutting ties. All the more important for couples with children since divorce won’t end parental obligations.

Divorce is never easy, and a lengthy process that involves emotion, time, energy, effort, and money, so preparation for the divorce process is important.  In this article, we will walk you through the life insurance aspect of the process and give you tips on how to manage life insurance before, during, and after a divorce.

Before The Divorce

  1.  Consult your divorce attorney. Divorce attorneys will help you consider the insurance options within the bounds of a proposed divorce settlement. This first step will keep the divorce proceeding on track. Here, it’s important to prepare a list of questions to discuss with your divorce attorney.
  2. Get your documents ready. Your life insurance documents, receipts, and other documents pertinent to your marriage should be readily available. Canceled life insurance policies of you and your soon-to-be ex-spouse should also be included as long as the cancellation occurred within the past 90 days.
  3. Understand what type of policy you have. Depending on what type of coverage you have, divorce may not affect your life insurance.
  •     Permanent Life Insurance – Policies of this type are considered assets and can therefore be split.
  •     Term Life Insurance – Not considered an asset but may be affected by divorce if the family members rely on the policy holder’s financial support or other circumstances.
  1. Update the insurance beneficiaries. Most life insurance policies enable the policyholders to change their beneficiaries anytime. Many couples with children have their spouse as beneficiaries so that they will handle the finances for the family in the event of an untimely death. The policyholder may choose to designate the children in times of divorce. If the children are minors, you may choose to set up a trust for them as the beneficiary. If the divorce is peaceful and cordial, the policy owner may assign the ex-spouse as the beneficiary.

During The Divorce

  1. Policy cash value. Your life insurance provider and your divorce attorney will help you determine how much the policy cash value has grown throughout the marriage. Depending on the type of life insurance you have, the cash value may be included in your marital assets and, therefore, divided evenly, and your soon-to-be ex-spouse will receive the half. How will it happen? The spouse may choose to refund their portion of the policy and from the conjugal assets during the divorce proceedings.
  2. Alimony and child support. Getting a divorce in Maine and many states involves laws that protect the welfare of children at least 18 years old. Parental obligations and child support should continue during and after the parents’ divorce and are part of the divorce settlement. You may also have to fulfill spousal support duties to your former spouse. For example, should anything happen to you and your ex-spouse, life insurance will prevent your financial hardship to your children. Parents must ensure that life insurance is available for the needs of the children. This also applies if the breadwinner parent will experience health-threatening conditions and work in a hazardous environment. Both parents will have to present medical records alongside the personal records during the divorce proceedings.

After The Divorce

  1. Paying the premiums. Both of the divorcees are obligated to fulfill the children’s financial needs. Paying the premiums for life insurance is part of that obligation. Who will pay the insurance? The arrangement should have been settled in the divorce agreement. If you were granted the principal custody and you worry about your ex-spouse not fulfilling the obligation, secure the records in your settlement. If the other party doesn’t pay the premiums, there will be lapses in the policy, and coverage will be invalidated. Ensure that you are notified when there is a possible lapse in the payment directly by the insurance company. How much will your ex-spouse or both of you have to pay? It can be adjusted from time to time according to the situation. The financial condition of the other party will also be considered.
  2. Single parent. In cases wherein the former spouse is no longer present in your child’s life, you should secure sufficient life insurance coverage to provide protection to your children and dependents.
  3. Settlement. Some people use the reimbursement money from life insurance to pay for the debts incurred during marriage and expenses during divorce proceedings.


Going on a new phase in life is never easy, and it is even tougher when you incorporate the difficulties of divorce. Since the process is already complex, take time to digest all the information needed to re-organize your life and life insurance. This is an essential step in protecting yourself, your loved one, and your future financial goals. A Certified Divorce Financial Analyst can help make the process comfortable on the monetary side because they are experts in financial matters involved in divorce ending your marriage with a clean slate and turning a new chapter in life.

If you would like to learn more about August Wealth Management and our CDFA and CFP services, please feel free to contact us or schedule an appointment.

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