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What Happens To An Insurance Policy If The Holder Files For Divorce?

If you are considering a divorce, one of the many things you need to think about is what will happen to your insurance policy. Unless you take specific steps, the policy will likely be canceled once you file for divorce. This can have serious consequences, especially if one spouse depends on the policy for insurance coverage.

In this post, Family First Life – Strong Tower & Hammer Lane Consultants will explain what happens to an insurance policy when a couple divorces and provide some tips for avoiding cancellation.

Insurance Policy & Divorce: General Things to Keep in Mind

Like many other legal documents, the specifics of an insurance policy can vary based on the state in which it is filed. However, there are a few typical things to be aware of regarding divorce and insurance policies.

In most circumstances, the policyholder will be the one who files for divorce. This means that if one party wants to keep the policy in place, they will need to file a response to the divorce petition and argue that retaining the policy is in their best interests. Otherwise, it will likely be canceled as part of the settlement agreement.

In addition, whoever is listed as the primary beneficiary on the policy will usually continue to receive payments after divorce, regardless of who winds up receiving alimony or child support payments. This is why it’s important to update your beneficiaries after a divorce. You may not want your ex-spouse to acquire the insurance payments, or you may no longer want your children to be the beneficiaries.

How Can I Protect My Insurance If I’m Getting Divorced?

There are also a few things you can do to protect yourself and your insurance policy in the event of a divorce:

1. Review Settlement Agreements

First, it’s important to carefully review any settlement agreement that you enter into with your spouse. This agreement will typically lay out the divorce terms, including how property and assets will be divided between you and your spouse. As such, it’s crucial to ensure that you are adequately protected in this agreement, especially if you have an insurance policy that is jointly owned with your spouse.

2. Stay Updated On Alimony Or Child Support Payments

Second, it’s important to keep up with any alimony or child support payment changes. Depending on the type of insurance policy you have and who is receiving these payments, they may be directly impacted by a divorce settlement.

For example, if your ex-spouse receives spousal or child support payments from you and has life insurance through your policy. This agreement may result in a change to your coverage.

3. Consider Increasing Your Insurance Coverage

Third, if you’re a man going through a divorce, you may consider increasing your life insurance coverage. Studies indicate that men are more probable than women to die unmarried and without children. This means that their spouses are less likely to have financial support after their death.

If you’re a female going through a divorce, you may want to consider decreasing your life insurance coverage. That is because you will have financial support from your spouses after a divorce and that will help balance out your disposable income.

4. Update Your Beneficiaries

Regardless of gender, it’s important to update your beneficiaries after a divorce. If you don’t, your ex-spouse could still receive the death benefit from your policy.

5. Ensure Your Policy Is In Good Standing

Finally, it’s necessary to remember that insurance companies can cancel policies. If you’re going through a divorce, make sure to keep up with your payments and keep your policy in good standing. Otherwise, you risk losing your coverage and leaving yourself unprotected.

Ending Note

Family First Life – Strong Tower & Hammer Lane Consultants, serving Denton, TX, can help you navigate divorce’s legal and financial implications, including protecting your insurance policy.

To learn more about how to update your beneficiaries or keep your policy in good standing, get in touch with us today.