Getting Divorced and Life Insurance

Getting Divorced and Life Insurance

Going through a divorce is tough. Thankfully, I have never experienced a divorce and hopefully never will. I have had plenty of friends and clients to go through a divorce and it is miserable for them. There are so many things to consider when getting divorced that often life insurance is overlooked. This can be a catastrophic mistake. More attorneys should warn their clients about life insurance needs and changes in the process before it is too late. When getting divorced contact your life insurance agent as well.

We saw a case of a couple that were divorced with children and no one thought to tell the ex-wife about life insurance. Her ex-husband remarried and she had full custody of the children. One day coming home from work, he was involved in a violent car wreck and died at the scene. The ex-wife understood that half of his estate would go to her children. What she didn’t know was the estate was upside down in debt and the new wife was now beneficiary of his $1,000,000 life insurance policy. She soon found out that she, nor the children, were entitled to any of that money. Life insurance beneficiaries receive proceeds without probate or the estate. She assumed her ex kept life insurance for their children and he did not. This should have been addressed in the divorce and was not. The new wife walks away a millionaire.

There are a few things to be considered when getting divorced about life insurance.

  • A judge can order a party to carry life insurance to cover child support or alimony in case of death. Protect yourself and your children.
  • Be sure the soon to be ex is not the owner of your life insurance policy, they can cancel it without your knowledge
  • In cases of couples on the same life insurance plan, go purchase your own plan. Spouse riders can be cancelled without your knowledge
  • Never let an ex-spouse pay your life insurance premiums for you. It is easy to lapse coverage and if you lose your insurability, you cannot purchase another plan
  • Never assume you or your children are beneficiaries of an ex-spouse life insurance. The policy owner can change beneficiaries and it is not public knowledge
  • Be sure you have enough life insurance to cover your new life. You may need more now that you are single.

Never procrastinate making changes to your life insurance while getting divorced. The stress and strain has been known to cause an early untimely death. Don’t forget to change your will for the same reasons.

Be sure your family is protected today!

“Divorce is a declaration of independence with only two signers”.Gerald F. Lieberman

Image by Stuart Miles at www.freedigitalphotos.net


Tim Wilhoit is owner/principal of Your Friend 4 Life Insurance Agency in Nashville, TN. He is a family man, father of 3, grandfather of 1, entrepreneur, insurance agent, life insurance broker, employee benefit specialist, salesman, sales trainer, recruiter, public speaker, blogger, author and team leader with over 30 years of experience in sales and marketing in the insurance and beverage industries.



63 Responses to Getting Divorced and Life Insurance

  • Great tips! Thank you

  • Thanks for sharing

  • how true

  • this highlights the need to hold yearly reviews with clients assessing the implications to the financial well being the changes in their life have and assist them in making the appropriate adjustments as needed.

    • Carmine, I totally agree with you. But I work mainly with the blue collar and gray collar markets. It is hard to advise people who do not respond.

  • Having gone through a divorce and being a life producer since the early 90s, it is hard to explain the psychological issues that you face going through a no issues, everything is mutual divorce much less a toxic blow up everything divorce. We are in a business that painting a picture and storytelling is vital to relaying an effective message to the client helps them make a buying decision or I am keeping the coverage in place decision. I encourage everyone plopped into this situation to tread lightly. Having lost both parents and surviving a divorce nightmare, I would say the divorce was more of a blow than the loss of the loved ones. Not all people feel this way, but a lot do. Personally this situation is one of my least favorite to deal with.

    • Chris thank you for sharing your experience with us. I hope for easing of your pain and others learn from your experiences.

  • 23 states have implemented laws that state that the ex is no longer the primary beneficiary on your life insurance policy unless it is either reaffirmed after the divorce is final or unless it is stipulated in the divorce decree that the ex is to be the beneficiary of a life policy. Apparently this was put in place because many people were not changing the beneficiaries on their policy after they got divorced and 2nd spouses and children from 2nd spouses could get left with no life insurance benefits

    • Louis, I do know of a couple of states that change the beneficiary after a divorce. I could not find this list of 23 states. Do you have the list or a link where these are listed?

  • I think that the community property states would be on the list, of which there are about 9 states and a couple of others that would allow for an opt-in to the state’s community property laws. Clearly this is a great reason to conduct annual reviews.

  • “Congratulations, your divorce is final”. That’s just the beginning, especially for female spouses who are left with caring for children. Unfortunately, many matrimonial attorneys do not provide life after guidance. There are so many new “What ifs” to be addressed. Providing post divorce guidance could be a practice in itself . Sam Kaufman. Sam@asglife.com

  • The overwhelming majority of people do not realize that if they had saved using index universal life as their retirement vehicle, upon divorce they would not be subject two only half of what they worked for to the ex-spouse. It is not classified as Retirement therefore it is safe from the divorce settlement. Best perspective pertains to the vast majority of states. http://sbrown.vfjpro.com/iul

  • Why am I not surprised that a virtual agent is Promoting IUL and suggesting you hide your assets from your spouse. They were the assets of the couples when they were married were they not? Funded by the couples accounts? I’ll just leave it at that….

    • Well said Melissa

      • No, Tim, not necessarily. I think both Melissa and Sam are making assumptions and it’s not good to generalize. Each situation is unique. However, I also disagree with the comments when someone promotes the “annual reviews” as being the catch all. Some of what you wrote about explains that disposition of life insurance and assignment might best be done by the judge during the divorce. If divorce degree occurred a couple of months before the Annual Review, some impact could be lost. There’s no perfect scenario here. A monthly or bi-monthly newsletter to clients might be good; but, will they read it?

        • Dean, If you read my comment below, you will see I agree with you about generalizing. The entire blog article is about there is not a foolproof way to help a divorcing client without their participation. I am hoping people read this article and realize these things before it is too late. I do appreciate your comments, you are spot on.

  • I would expect a Primerica agent to have a problem with the truth! who said it would be funded by the couple number one you are making assumptions and you know what they say about doing that…

  • Bottom line is every case is different and unique. None of us should make blanket statements, it is never going to be a one size fits all industry.

  • This is so true. A good divorce document requires both parents to have $250,000+ of life insurance on him/herself with their other parent as the beneficiary for the benefit of their children.

    I’ll help folks in Minnesota woth this issue since I work in family law and sell life insurance. Plus, as a widow, I’ve benefitted from my late-husband’s life insurance, so I know how valuable it is.

  • Christie, that is a great testimonial. Thank you so much for sharing.

  • I included in my divorce that my EX had to carry life insurance in a specific amount to cover child support in the event he passed before the kids turned 18. When he did not provide proof of coverage I brought it to the courts attention and they did not enforce the divorce agreement. 🙁 (Now with that said I did not have the best attorney) and I firmly believe it should be a part of any divorce to cover any obligations either of you have in the event of an untimely death. Just make sure it is worded properly so it can be enforced.

    • Colleen, as tough as that probably was to share, we really appreciate it. Hopefully your story will prevent others making those same painful mistakes. Thanks again.

  • Follow along with me on this: Let’s say the husband and wife #1 are married for 15 years and have two children together. They both work full time and participate equally in the payment of the family’s financial obligations. When the insurance agent came to the house, they both sat in on the presentation and both agreed to purchase the $1M policy on the husband.

    Fast forward: One night while singing karaoke at a local Indian casino, the husband meets a hottie 23 years younger than wife #1. After a couple of drinks, he and the young lady decide to enter into an arrangement where they swap DNA on a regular basis. In a matter of months, young the homewrecker is now wife #2.

    The husband forgets to call his insurance agent in order to change his beneficiary designation – because in his mind, he has no plans of dying any time soon.

    One night after church, the husband perishes in a horrible auto accident. Wife #1 assumes she’s still the beneficiary and counts on this money for the children’s future. The children are crushed, but know their father would have taken care of them – had his heart continued to beat.

    The State, however, changes that. They rule that wife #1 (who shared in the premium payments of the policy in question) is no longer beneficiary. Wife #2 is automatically entitled to the benefits she paid for – and counted on for her children’s benefit.

    They must live in California.

    • Mark,
      I like your analogy, I am not familiar with California law, but this does seem against everything I have seen or heard after 24 years in the insurance business that a state, any state, can override a contractual beneficiary on a life insurance policy. Whether on purpose or accidental, it seems a person has the right as an owner of a life insurance policy to name anyone they please as beneficiary, regardless of what some judge thinks. I hope this is not right, but we do live in scary times when it comes to following laws don’t we.

  • Sam, you are an example of why Life Insurance agents and advisors get a bad reputation and we end up with the government developing laws like they are thinking they are “Protecting it’s citizens.” Thanks. Really appreciate it.

  • Awesome article

  • Michael and Tim …Are you ADVISORS or MARRIAGE COUNSELORS? You guys live in a unrealistic world where everything is honkey dorry, and people live happily ever after. Why would you set your clients up to be destroyed financially in the event of a divorce. hope for the best prepare for the worst that’s what the good advisors do wake up!

  • Michael… if your clients tell you to expose them to the possibility losing half of their retirement savings in the event a divorce… you are doing a great job! because we all know that when people get divorced everyone is happy and they want to be completely fair in the settlement…RIGHT? this is in addition to the fact that having money in an iul is the best place their retirement savings could be anyway it’s called a win-win… look it up!

  • Esbee, I cannot speak for Michael, but to answer your question I am neither a financial advisor nor marriage counselor. I am an independent life insurance broker. If you go back and reread my article you will see my advise comes from over 24 years of experience dealing with people that have received really bad advise or no advise about handling their life insurance changes after a divorce. The comments took on a life of their own, I do agree with most of their scenarios. Sorry if I offended you and no I do understand everything in life is not “honkey dorry” nor “happily ever after”, hence why I wrote the article.

    • Any decent attorney is going to get cash value in any life policy split up if it was funded during the marriage. Besides, I would love the conversation at the kitchen table….Mr. Customer, if you fund this IUL and overfund it instead of buying your wife new shoes this month, Mrs. Customer, you won’t have any access to it if Mr. Customer ever leaves you. That would go over really well. I might have to wear a helmet to the meeting to protect myself from the cross fire when she takes off her current pair of shoes and throws them at Mr. Customer.

  • Excellent piece, Tim. It amazes me that several confuse the purpose of your article with their sole purpose of denigrating any form of life insurance other than their product focus!

    • Phillip, thank you for your kind words. One thing I have learned from almost a quarter of a century in this business, doing the right thing for your client never goes out of style. When you always do the right thing, business flows back to you in countless ways.

  • all in all….we know divorce is not the outcome one sees when entering marriage. Having been through it myself, I see how I was and many of us are so uninformed about retirement products and just go along and depend on what our spouse might tell us we are doing or what our JOBS have in front of us. It is easy and needs no real intellectual output to do what “everyone” does. With that being said, I came out of all it, becoming an independent life insurance agent because I strongly feel people need to be financially protected in case of……

    • Kerry, I am sorry for this struggle, but I am glad a big positive came from the ordeal. Thank you for sharing your story. I am sure it will inspire others.

  • “…make sure your soon to be ex is not the owner of your life insurance….” There are two sides to this; the mother in the original story allowed her ex to own his own policy and her children were left with nothing, including no child support to raise them. However, had she owned the policy the new wife and children may have been left with nothing. Divorce can be lose lose for a life insurance agent. I agree it is VERY important for both sides to work with their agent throughout the divorce proceedings

  • To make sure ex spouse has control on the ownership of policy , easiest way will be to be owner or joint owner of the policy

  • i have a friend/family law lawyer and she always mandates in her separation/divorce agreements that the non-custodial parent has life insurance to ensure all child support payments are met even if this person dies. Makes total sense to me.

  • shouldn’t both parties be managed to have it? what happens if the custodial patent passes away? doesnt that leave the non custodial parent to take care of the kids now without any support?

  • Regarding life insurance; No one is more evil than someone’s own family members. I see things all the time that would make even a dishonest agent cringe. Go the extra mile to disclose everything and you’ll have my respect.

  • Mark, doing the right thing never goes out of style.

  • A side note: many if not most judges have no clue how life insurance works. I was involved in a case where the judge just ordered that the husband get two million dollars of “life insurance.” No specification of term or otherwise, or consideration of whether he could get through underwriting. He had cancer a year before and no company would write him, but that didn’t stop the judge and his ex-wife from making his life a living hell. The judge at one point told him to get it or he would go to jail for contempt. I had to waste half a day testifying why a judge cannot just wave a wand and make it so. I offered to do a lunch and learn with the judge corp– but no offers. Maybe your chief judge is more open.

  • Andy, that is an excellent point. Thank you for sharing. It illustrates how bad the divorce court systems really are. People have to watch their own “behinds”.

  • Tim, I guess the flip side is that all you have to do to fulfill the order is get a ten year term for a potentially low price. Of course, if the judge orders you to renew it at the end of each term, it could be a nightmare!
    For those who really want to provide and protect for their children, family court is sadly not the place usually.

  • The cases I have worked with court ordered life insurance are usually 15 or 20 years depending on the age of the children. If a judge does order life insurance I have found they order long enough to get the child through school. However, several judges do not even order life insurance at all and most don’t understand uninsurability like your example. Buyer beware!

  • The requirement of life insurance on the x spouse is fine but it should be accompanied with update wills, written guardian decisions for the children, and the life insurance should be held in a revocable trust so the proceeds are not squandered away. Not a market to spend a lot of time in.

  • when you say the word insurance ..people automatically think the word death and this is what puts the agent in an uphill battle position! that makes it difficult to get to the bottom line which is the numbers comparison portion of the presentation.

  • In my case, the judge really didn’t care about details. He just wanted proof that a life insurance policy was in place. It could have been issued by Jimmy’s BBQ and Life Insurance Company and it would have been fine.

  • Forgive me for beating a dead horse, but I wonder if there are other points to consider: many times judges will approve a contract between divorcing parties that cannot be undone. In my aforementioned case, even though the one spouse had cancer, the judge ruled that because it was a contract, he must get life insurance or be in violation. Are the courts possibly doing more harm than good for families by not understanding what they’re approving/ordering?

    Second, my question is whether the judge is also putting a large dent in the man’s ability to get insurance anytime in the future. The judge required him to apply to as many companies as he could. What will a future application look like when reporting agencies indicate he tried to apply for perhaps dozens of policies from different companies– all of which declined him.

    Finally, if ever approved, premiums will be likely unaffordable for a person with a cancer history seeking millions of dollars in life insurance.

  • What a mess born out of ignorance from this judge. He should have seeked council from a life insurance expert before ruling but instead ruined this poor guys chances of may be ever purchasing affordable life insurance again. You are correct the multiple decline hits to his MIB report will prove a disaster for him in the future. What a mess!

  • Just curious what happens in the US with existing life policies especially if they are Joint Last to Die – if they are seniors does the Judge consider a life settlement as a way of splitting the asset or at least determining its Fair Market Value ??

  • I could handle working both of these needs.

  • I got caught up in a divorce situation that was one of the worst nightmares I’ve ever been involved in. The policies had a lot of cash value in them which, of course, was marital property. When it was all said and done, the courts forced the clients to cash in the policies and split the proceeds. By then, all everyone was interested in was the money and not whether or not the protection was still needed or taking into account insurability.

  • WOW, interesting story @leasommers

  • I saw an interesting quote yesterday that another agent has on a sign in their office…”It is my job to sell you life insurance. Please, do not make it my job to tell your family you didn’t have any.” Money should never be the issue in situations like that. The coverage need should be considered first.

  • Michael, that is an awesome sign. Thank you for sharing it.

  • this is a very good article to make clients aware of and another reason to meet clients on a regular basis because ans sharing this because and educated client will see the value in taking the right actions to protect their families and themselves in such a situation.

  • Had an email today reminding me of the second chapter of the inefficiencies of divorce, family law and life insurance. In the case I was involved in, a couple of insurance companies said they’d be willing to insure my client in two to three years. At that time, his premium is projected to be more than $22,000 a year for two million dollars of ten year term. He would no longer be able to afford college for his children, but the court could force him to do it with a penalty of contempt of court.

  • Andy, thank you for sharing this story. Years ago people in power were wise, but not so much today. What a nightmare for this poor guy.

  • Not something that is pleasant to think about, but it needs to be looked at.

  • Interesting and valuable information. As always! Thanks for sharing

Leave a Reply