Going through a divorce means rethinking many aspects of your life, including those that often get overlooked—like your life insurance policy. Did you know that your life insurance could still list your ex-spouse as a beneficiary? While it might not be top of mind, this is an important step in protecting your financial future and ensuring your assets go to the right people when you’re gone.
If you’re wondering how life insurance fits into your post-divorce checklist, we’ve got you covered.
Why Is It Important to Review Your Life Insurance After a Divorce?
Life insurance plays a significant role in financial planning. It’s not just about protecting your income—it’s also about ensuring that the people who depend on you are supported after you’re gone. But after a divorce, your priorities change.
Imagine this scenario for a moment. You’ve finalized your divorce and moved on with your life only to discover years later that your ex-spouse is still listed as your policy’s beneficiary. If something happens to you, they could end up receiving your payout while the people you care about most, like your children or a new partner, are left out.
What Happens If You Don’t Update Your Insurance Policy?
Leaving your policy unchanged can lead to serious problems. Most insurance companies won’t automatically remove an ex-spouse as a beneficiary after a divorce. That means they could still legally claim the benefits unless you take action to update it.
Your life insurance policy should reflect your current wishes, not decisions you made years ago. If you don’t make these updates, your money could go to someone who is no longer part of your life, leaving your loved ones unprotected.
Who Should You Name as Your Beneficiary?
Deciding who to list as your beneficiary is one of the most critical steps. Here are a few points to consider when choosing the right person:
- Your Children: If you have kids, they’re often the first choice. However, keep in mind that minors cannot directly receive life insurance payouts. You may need to set up a trust or appoint a guardian.
- A New Partner: If you’ve started a new chapter in your life with a new partner, you may want to make them your beneficiary.
- A Family Member: If you’re not remarried and want to ensure your family is supported, a sibling or parent may be a good choice.
Can You Have Multiple Beneficiaries?
Yes, you can list more than one person as a beneficiary on your life insurance policy. For instance, you could assign a percentage of the death benefit to each child or split it between your children and another loved one.
This approach ensures that your policy benefits all the people who matter most to you after your divorce.
What If You’re Paying for Life Insurance as Part of a Divorce Settlement?
Divorce settlements can complicate life insurance policies. Sometimes, one spouse is required to maintain a life insurance policy with the other listed as the beneficiary, especially if there’s an obligation to provide child support or alimony.
If this applies to you, it’s crucial to fully understand your obligations and work with your lawyer to ensure everything is properly documented. Keep in mind that once these obligations no longer exist, you can update your policy to remove your ex-spouse as a beneficiary.
Don’t Forget to Review the Coverage Amount
Divorce often changes your financial situation, so now is a good time to assess whether your life insurance coverage still meets your needs. Are you underinsured and need to increase your coverage? Or, do you no longer need as much protection and want to lower your policy limits?
Reassessing your coverage ensures that the amount accurately reflects your current financial responsibilities and goals.
How to Update Your Life Insurance Policy
Updating your life insurance policy is easier than you think. Follow these steps to make the changes:
- Contact Your Insurance Provider: Reach out to your insurer and request a change of beneficiary form.
- Fill Out the Forms: List the new beneficiaries you’d like to designate. Be sure to provide all required personal details, such as names, birthdays, and Social Security numbers.
- Submit the Forms: Once completed, submit the updated forms to your insurance provider and confirm they’ve been processed.
- Keep a Record: Finally, store a copy of your updated policy in a secure place alongside other important financial documents.
Do You Need to Speak With an Attorney or Financial Planner?
While you can update your life insurance policy independently, it’s a good idea to seek advice from professionals. Attorneys and financial planners can provide valuable insights into how your life insurance policy fits into your overall financial plan post-divorce.
For example, a Roanoke divorce attorney can help ensure that your updates comply with your divorce settlement terms, while a financial planner can guide you on choosing the right coverage and beneficiaries.
Beyond Life Insurance – Other Documents to Update After a Divorce
Life insurance isn’t the only document you should update after a divorce. Make sure you review other critical financial and legal documents, such as:
- Your Will
- Retirement Accounts (like 401(k)s or IRAs)
- Health Care Proxy
- Power of Attorney
Updating these documents will go a long way in ensuring your financial and legal affairs are in order.
Need Help With Your Post-Divorce Affairs?
Updating your life insurance policy after a divorce can feel overwhelming, but it’s an essential part of protecting your financial future. If you’re unsure where to start or have concerns about how your divorce settlement impacts your life insurance, Slovensky Law is here to help.
Our experienced team has helped countless individuals secure their financial futures after divorce. Contact us today for tailored advice and guidance to ensure everything is handled with care.
Take control of your financial future—schedule a consultation with Slovensky Law today.
