February 26, 2024

Life insurance is something you buy out of love. After all, in most cases, you never get any return of personal value from the life insurance policy you paid for, instead, that value is left to your loved ones who will receive a death benefit if something happens to you.

That’s why life insurance is an important topic when you’re divorcing. This is because, typically, your spouse is your primary beneficiary, and you need to decide whether you want that to remain the same. Divorce and life insurance can become more complicated if you have children.

Read on to learn about your life insurance options during divorce.

Do I need to change life insurance beneficiary after divorce?

Designating a beneficiary is an integral part of signing and maintaining a life insurance policy. After all, if you die, your life insurance company needs to know to whom they should pay the death benefit.

In most cases, the primary beneficiary of a married life insurance company will be the spouse. If this is the case for you and you are going through a divorce, your first instinct may be to change your beneficiaries to someone else. Before doing so, please consider the following.

what it means to change beneficiaries

When you remove a beneficiary from an insurance policy, it means that when you die, that beneficiary will not receive any of the policy’s benefits. Instead, benefits will go to one or more of your new beneficiaries.

Why keep an ex-spouse as a beneficiary?

Although it may seem strange at first, there may be several reasons to have your ex-spouse as the beneficiary of your life insurance policy. For example:

  • Court order: In some cases, your divorce papers may state that you continue to pay life insurance benefits in your ex-spouse as a beneficiary as part of the divorce. In this case, if you change the beneficiary on the policy, you are violating the legal order of the court.
  • Your Children’s Ages: The primary beneficiary of any life insurance policy must be an adult. So if your oldest child is under 18, you may want to strongly consider making your ex-spouse the primary beneficiary of the policy, at least until your oldest child comes of age, but only if the death benefit will be used to cover child-related expenses. (More on that below.)
  • Compassion: Not all divorces happen out of frustration and anger. In some cases, you may want your ex-spouse to be innocent. Instead, you want to see them perform well. In this case, you may retain your beneficiaries out of compassion for your ex-spouse even after divorce.

What happens if you don’t change the beneficiary?

When you die, your life insurance company will pay the policy’s death benefit to your listed beneficiaries. This means that your ex-spouse may receive the benefit if you do not change the beneficiary after the divorce.

Life Insurance Considerations When You Have Children After Divorce

As mentioned above, one of the reasons to keep your ex-spouse as a beneficiary is if you have children. Here are some things to consider.

If something happens, will your ex-spouse be able to support your children?

If your children are under 18, or even young adults, they may rely heavily on you and their other parent for financial support. If something happened to you, would your ex-spouse be able to provide the support your children need?

This is an important consideration because generally, keeping an ex-spouse as a beneficiary has little to do with wanting to support the ex-spouse. Instead, for many, the idea is to give the ex-spouse the ability to care for the kids when they need them (if you’re not there).

Of course, if your oldest child turns 18, you can make them the primary beneficiary of your policy. But will young people be as responsible with money as their parents? For many, the answer is no.

higher education

This goes hand in hand with helping your ex-spouse support your children after your death. You want to be by your side to see your child graduate from high school and to support them as they complete school and graduate from college. If you were unable to do so, do you think your ex-spouse would be able to support them on their own?

If not, it’s a good idea to consider the cost of higher education and distribute that portion of the benefit to your ex-spouse with the understanding that the money is going to help your children get higher education.

support as an adult

According to statistics, about one-third of adults in the United States are financially dependent on their parents a recent study. When you’re considering life insurance after divorce, it’s important to consider whether your spouse will be able to provide your children with adult maintenance. If not, it is best to use part of your life insurance policy for supplemental support.

Should You Change Your Life Insurance Amount After Divorce?

If you decide to change the beneficiary on your policy after a divorce, or even if you keep your ex-spouse, you may also consider changing the amount of life insurance you have. After all, there may be strong arguments for increasing or decreasing the amount.

So, what’s the best option? It’s entirely up to you. Still, you’ll find reasons for adjusting your policies up and down below to help you decide.

Why Consider Buying More Life Insurance?

You may consider purchasing more life insurance after divorce (usually by purchasing a second policy) for a number of reasons. These include:

  • Child support: In households where both spouses have money, you might look at a life insurance policy as a way to supplement your spouse’s income while you’re not around. So right now you’re probably buying less than you need on your own.
  • You’ve Achieved Milestones: If you’ve achieved financial milestones (such as a raise) throughout your marriage, you may not have adjusted your life insurance to match. In this case, what you leave for the beneficiary may not be enough to provide the support they are used to. For example, are your benefits sufficient to keep your children in your home?

Why consider reducing the policy value?

You may also consider reducing the value of your policy for a number of reasons. Among the most important reasons are:

  • Contested Divorce: Your divorce is like pulling teeth. You never want to see your ex-spouse again, and your kids are doing fine. In this case, it might make sense to reduce the value of your life insurance policy, since your children don’t need as much support, and you’re not interested in supporting your ex-spouse.
  • Your financial means: After a divorce, two incomes suddenly become one. This can cause serious financial difficulties. If you’re having trouble paying the premiums on your current policy, consider reducing the policy value to make payments more manageable.
  • New financial situation: Maybe you paid off your mortgage, or fulfilled other common financial obligations during this time. These may not be directly related to your divorce, but they are common reasons why you may need less life insurance.

However, if you go this route, be aware that you still want to have enough coverage for your family in case the worst happens. A common rule of thumb is to buy policies worth 5 to 10 times your annual salary.

How Haven Living Can Help

Whether you are currently single, married, divorced, or otherwise, life insurance can play a key role in planning for your future. That’s because life insurance is a way to provide financial protection for those who depend on you to pay for their daily essentials. This could be for a spouse, but it could also be for an adult child, sibling, aging parent, beloved charity, or some combination of the above.

Term life insurance is one of the most affordable types of life insurance because it provides coverage during the years you need it most — when you have expenses like your mortgage or your kids’ school fees, and when you’re earning income. It also covers your young and healthy years. In other words, it covers the years in which you are unlikely to die, but your death would cause severe financial hardship to your loved ones.

Haven Life makes getting life insurance a breeze. You can get a free online life insurance quote and start the online life insurance application process in minutes. Inner peace awaits – and it can be an invaluable relief during life’s most stressful moments.