Divorce and Life Insurance Policies

Divorce is a difficult time for everyone involved with a lot to consider and manage. Among those details you might need to think about are any life insurance policies you may have, either jointly or singly, and what to do with them when you separate.

There is no one right way to manage your life insurance policy as part of a divorce settlement. That’s why we always advise you to speak with a life insurance expert to find the best way forward for your situation. 

However, it’s always helpful to go into any meeting with at least some idea of what to expect, which is why we’ve written this article.

In it we’ll discuss:

Call us on 0808 189 0463 or make an enquiry and we’ll match you with an expert who can advise you on the next steps to take. 

What happens to life insurance policies in a divorce?

It depends on the type of life insurance policy or policies you and your former partner have. 

The most straight-forward situation is where you each have separate, single life insurance cover. The main detail you would likely wish to be changed is the beneficiary. Proceeds from a policy will go in to the deceased’s estate. 

When you are married, your partner gets the full amount as there is no Inheritance Tax liability between spouses. So, after divorce it would go in to their estate and be liable to IHT unless the policy is written in trust for another beneficiary such as their children.

Where you have a joint life insurance policy and are going through a divorce, things can become more complex. There are two main options, although some providers may have other rules to allow for couples separating.

They are:

  • You can cancel the policy and take out new single ones.
  • One party can sign the joint cover over to the other, but they must then keep up the repayments to maintain the cover.

If you choose to cancel your joint life insurance policy after a divorce, please be aware that any new cover you take out could be more expensive due to a number of factors, including your age.

Where a divorcing couple opt to sign joint life insurance over to one party, be sure that they can afford the payments and that all the benefits remain intact. This is particularly important where the cover is for a mortgage or if the life insurance would cover child support payments, should the main financial earner die.

Other options

Some joint life insurance policies have additional rules that allow for divorce and separation, but you would need to check this with your provider.

Or, if you’re going through a divorce but are unsure as to what the rules are regarding joint life insurance, you could speak with an experienced advisor, like those we work with. A life insurance expert can answer all your questions regarding life insurance and divorce in the UK. They can also help you find the right solution for your specific situation.

Can joint life insurance policies be split when a couple separates?

In most cases, no, a joint life insurance policy cannot be split in a divorce or separation. However, some providers do offer separation benefits that may allow you to split your joint cover into two single policies, though you would need to have ensured this was part of your life insurance when you initially took the cover out.

Where your policy doesn’t have a form of separation benefits, then you will really only have two options that have previously been discussed: to cancel the joint cover and take out two new single life insurance policies during your divorce, or for one party to sign the joint life insurance to the other.

Do life insurance policies form part of a divorce settlement?

The answer to the question on whether or not life insurance policies can form part of a divorce settlement depends on:

  • Your terms and conditions of your policy
  • The situation, i.e. the circumstances of your separation
  • How you agree to divide up your assets

If you have single life insurance policies, then you can simply speak with your provider and request a change of beneficiary form. That way your cover remains yours and the beneficiary will be the person or people of your choosing.

Where you have a joint, whole life policy and you opt to cancel it, there could be some monies due to come back to you. This may need to be split or, in some cases, could form part of the settlement, depending on how much it is.

Another option, where the life insurance will no longer be required for the mortgage after a divorce but you wish for any children or close family members to benefit, then it can be put into trust. In this scenario, it likely wouldn’t form part of a divorce settlement.

With the variety of options to manage your life insurance policy in a divorce, it can be a good idea to speak with a life insurance expert, like those we work with.

They understand all the ways in which you can transfer and manage a joint life insurance policy after divorce or separation. And where the best option is to cancel your cover, they can also help you find the best value life insurance policies for your needs, going forward.

Speak with a life insurance expert

If you’re going through a divorce or separation and have questions or concerns relating to your life insurance cover, it’s a good idea to speak with a fully qualified life insurance advisor, who can advise on your change of circumstances.

We work with reliable life insurance experts who can help you find the best solution to your needs, no matter the cover you have and the situation you’re in

You can call us on 0808 189 0463 or make an enquiry to get in touch. You can then sit back and relax while we do all the hard work of connecting you with the right life insurance advisor for your needs.