Guide
Life insurance after divorce explained
In this guide we look at the differences between individual and joint life insurance policy after divorce. You’ll also learn how it affects named beneficiaries, and how to change them. And we look at the relationship between life insurance and divorce settlements.
Individual life insurance and divorce
When you take out an individual life insurance policy, you need to name a beneficiary. That’s the person who’ll receive the payout if you die. If you took out an individual policy, there’s a good chance you originally named your ex-spouse. After separating, you might not want them to receive any money if you die. You might prefer it to go to your children, relatives, or a new partner.
Changing life insurance beneficiary during divorce is usually straightforward. First, contact and inform your life insurer. They will usually send you a change of beneficiary form. You state who you would like the new beneficiary to be, return the form, and your policy will be updated.
It’s important to tell the new beneficiary so they can claim if you do die. You’ll also want to inform your ex, so they know what has changed.
If you depend on your ex for financial support, you might decide to take out insurance on them. You’ll need their consent. But this approach can be helpful. It means that if they die, you’d continue to receive money to help raise your children or with other living costs.
Learn more: Life insurance beneficiaries explained
Joint life insurance policy after divorce
Couples often choose to take out joint life insurance policies. This may cost less than each person taking out their own policy. But what you do about joint life insurance after divorce is different. There are two options.
First, you could cancel the policy altogether. This would mean neither of you are covered any more. This is probably the simplest option. But it has drawbacks. You will have to ‘write off’ much of the money you paid into the policy. Also, the older you are, the more individual life insurance costs. So, if you both take out new individual policies it’s going to cost you both more.
Your second option is to transfer the policy to just one partner. They will then need to keep up payments that both of you were paying before. Depending on the circumstances of your divorce, this might be tricky to negotiate. To transfer the policy to one partner, you need to complete a legal document with both your signatures agreeing to the change. The insurer will then register this.
This approach might be right if one person is keeping the home or taking more custody of children. This is because the payout may be more useful for them.
Learn more: Joint vs single life insurance explained
Divorcing with a mortgage policy
Many people take out life insurance when they get a shared mortgage. If one of you died, the other would receive money to pay off the debt. But after a divorce, this kind of insurance might not be right anymore.
If you both decide to sell up and leave the home, cancelling the joint life insurance after divorce might make most sense. You can then each get your own insurance for your new living situation.
Or if one of you decides to stay, it might be best to transfer the entire policy to them.
Learn more: Mortgage protection explained
Life insurance beneficiary after divorce
If you are thinking about changing life insurance beneficiary after your divorce, take some time to think through your options. If you have an individual policy, your ex may be the named beneficiary. Deciding who the new beneficiary is will depend on your circumstances.
If you have children together, you might decide you want a payout to go to them. If you die before they turn 18, you will need to put this money in a trust. The trustee will look after the money until your children are old enough to manage it themselves. The trustee could be a solicitor. Or it could be someone else you can rely on, like a sibling or close friend.
Alternatively, you might prefer to change the beneficiary to someone else. This could be a new partner. Or it could be one of your relatives, such as a brother or sister.
Whatever you choose to do, you need to contact the insurer and ask for a change of beneficiary form. This will usually be a fairly easy process. Remember to inform your ex that you’ve removed them as the primary beneficiary. While you’re doing this, it’s also worth thinking about your will. Make sure to change it so it matches your new wishes.
Of course, you can also keep your ex as the beneficiary if you so wish.
Learn more: Life insurance and trust explained
Do I need to let my life insurance provider know if I’m getting divorced?
It’s usually worth telling your life insurer of a big change like this. Life insurance divorce guidelines vary from one provider to the next. But the policy is normally provided based on certain facts about your life. If one of these changes, then the insurer will want to know. Check your policy documents or call the insurer up if you have any doubts.
This is especially true if you have a joint insurance policy. If you’re divorcing and no longer together, this may break the terms of the policy. If you needed to make a claim but hadn’t told the insurer about your new circumstances, they might not pay out.
Do life insurance policies form part of a divorce settlement?
Whether you include life insurance in a divorce settlement depends on a number of things. In some cases, life insurance is irrelevant to the settlement. In other cases, it’s very important. Or it could simply be up to the both of you to decide if you want to include it or not.
If you each hold individual life insurance policies, this will not affect the settlement. You have solely been storing the money away so you just need to change the life insurance beneficiary.
Joint life insurance policies after a divorce are relevant to the settlement. Depending on the kind of policy you have and what you choose to do, it will affect the settlement in different ways.
For example, if you sell off the house, have no children and go your separate ways it might be easiest to cancel the policy. But if one of you decides to stay in your home, the person leaving needs to transfer their right to the policy over. They could reasonably argue they’ve been paying into that fund for several years. They may then ask for some sort of compensation seeing as they won’t benefit from it.
An alternative is to agree to keep the policy going but change the beneficiary. If you have children together, you might agree to transfer the payout into a trust if either of you dies. That means you both know your children would receive the money.
Vitality life insurance
We provide life insurance for every stage of your life. Here are some of the benefits of taking out life insurance with Vitality:
- A brand you can trust - In 2023, we paid out 99.7% of life insurance claims.*
- Get a lower monthly premium upfront when you add Optimiser to your plan. Keep your premiums low when you stay active.
- Access to Vitality partner discounts and rewards.
- Get free no-obligation advice. Our advisers offer expert advice to help you make the right decisions.
Last updated: 14 October 2024
*Vitality Claims and Benefits Report, 2024
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