Divorce and Life Insurance

Getting a divorce in NJ or NY means making changes.

Just about every aspect of your current lifestyle will be altered, and your life insurance needs are no exception. However, just because you’re getting divorced doesn’t mean you should drop your life insurance.

If you and your ex-spouse don’t have children, and there isn’t anyone else relying on you for support, you may not need as much life insurance as you did when you were married.

But there are instances in which getting a divorce in the states of NJ or NY actually increases your need for life insurance, such as when:

  • You are the parent of dependent children, and you must contribute to their support.
  • The court approves a divorce settlement that requires you to carry a certain amount of life insurance with your ex-spouse as the named beneficiary, the proceeds from which will be used to support your children in the event of your death. This requirement generally ends when the children reach a certain age. Life insurance may also be required to be carried by an ex-spouse who has obligations to pay alimony.
  • The coverage you previously had is terminated as a result of the divorce.

Divorce and Life Insurance

In addition to revisiting the amount of life insurance you carry, you may also want to change your beneficiary. If your ex-spouse is the named beneficiary on your life insurance policy, and you plan on changing that designation, be sure you remain in compliance with your divorce decree. If your settlement agreement requires that you maintain your ex-spouse as the beneficiary of your life insurance, you cannot legally remove him or her.

Keep in mind that if your ex-spouse was designated as your beneficiary when your purchased the policy, getting a divorce doesn’t necessarily alter that. There are some states in which divorce automatically invalidates the ex-spouse as the designated beneficiary. However, don’t assume you live in one of them. Talk with your attorney and verify it.

Another point to remember: Specifying a change of beneficiary in your will doesn’t supersede the beneficiary designation stated on your life insurance policy. The only way to remove your ex-spouse as your beneficiary is to execute a change of beneficiary with your insurer. Your insurance agent can help you with the necessary paperwork.

If you do change your beneficiary, don’t name a minor child. Insurers will not pay the proceeds from a policy directly to a minor, and the probate court may require that a trust be established and a guardian appointed, in order to manage the proceeds from the policy until the child becomes an adult.

These are only some of the life insurance considerations involved in a divorce. Consult with your attorney and an insurance agent for more information about your situation.

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