What happens to life insurance after divorce?
Separating and starting a new journey
Divorce can be a time where emotions run high, and finances can get complicated.
It may not be the first thing that comes to mind, but it’s important to take care of any life insurance you have.
Whether it's held individually or jointly with your ex-partner, here are some things to think about to help you prepare for your next chapter.
What happens to individual life insurance after divorce?
If you and your ex-partner have individual life insurance, you may not need to make any big changes.
You should still check you have the right cover once the costs and financial impacts of your divorce are clear. This is even more important if you have children.
If your life insurance is set up to benefit your ex-partner, you may want to change this. It’s worth bearing in mind there may be other legal considerations, such as special provisions in your will, that could need changing too.
Can an ex-spouse claim on your life insurance in the UK?
There is still a possibility that your ex-partner/spouse will still be able to claim on your life insurance when you die, if the policy is held under Trust and they are a Trustee.
However, they won’t be able to benefit from the money unless they are named as a beneficiary/potential beneficiary in the Trust.
What are the separation benefits of joint life cover?
If your relationship ends, your insurer may be able to separate your joint cover, or it might be possible for one person to take it on. If that’s not an option, you can take out a new policy to continue your cover. Make sure you check what your insurance provider offers.
We offer separation benefits if you take out joint cover, and you are accepted on our standard terms. This gives you the option of splitting your cover into two individual policies if you separate or rearrange your mortgage into one name.
It is worth noting however, that both you and your ex-partner must agree to the change. Also, you can't use the separation benefit if you are able to make a claim, i.e. a terminal illness claim.
To make this process as straight forward as possible, we won’t make you answer any extra medical questions.
What are the death benefits of life insurance?
You can put your life insurance in trust if you want to choose who will benefit from a payout. It allows you to name specific people as beneficiaries, such as your children, other family members or even friends. You can change them at any time by completing and sending a deed of appointment form to the trustees of your policy. For more information on our Trusts, this article may be useful.
What happens to your mortgage when you get divorced?
A change in circumstances, like going through a divorce, will likely mean a change in living arrangements. If one person decides to stay in the same house, they may choose to take over the whole mortgage. That could be a time to review any existing life insurance taken out mainly as mortgage protection – or any cover that’s changed, for example after the separation of a joint policy – to make sure it still meets their needs.
However, if a couple decides to sell their home, they might choose to cancel their cover and explore what options are available based on their new circumstances.
Many factors can impact the financial effects of a divorce, such as age, health and employment. If you feel uncomfortable or unsure about any decisions, it can help to speak to a professional financial adviser to talk through your options. If you don't have a financial adviser, you can find one at unbiased.co.uk. Please be aware that you may need to pay for this advice.
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