Life insurance and divorce

Going through a divorce is never easy, and amid the whirlwind of emotions and decisions, life insurance might be the last thing on your mind. But it can play a significant role in your overall financial picture, so it’s important to know how to navigate it during a separation.

Are life insurance policies considered assets?

Yes, life insurance policies can be viewed as assets in a divorce. Permanent life insurance, such as whole or universal policies, have a cash value that can be counted toward your net worth and could be divided in a divorce. Term policies, on the other hand, usually don’t have cash value but can still play a role in financial planning, especially if they are tied to specific obligations, such as paying down a mortgage.

How and when to update beneficiaries

As soon as you initiate divorce proceedings, it’s time to think about your beneficiaries. You don’t want to wait until the last minute to update them. Consider who depends on you financially: your children, maybe a new partner or even a favorite charity. It’s a personal decision, but one that needs thoughtful consideration.

What happens to life insurance after a divorce?

Post-divorce, reevaluating your life insurance needs is a smart step. If your financial responsibilities have shifted, consider whether a new policy might better serve your situation. Sometimes, life insurance specifics are even included in the divorce decree, ensuring that obligations such as child support are covered in the event of your untimely passing.

Ensure that your family is protected

Your definition of “family” may have shifted, but the need to protect your loved ones remains the same. Whether it’s maintaining your current policy or investing in a new one that better fits your needs, it’s important to help protect those who depend on you. Life is unpredictable, but having the right life insurance in place can offer a sense of security as you move forward.