Barbara J. Katzenberg, Attorney at Law

Divorce: How to handle life insurance issues

When someone in Massachusetts is working through a divorce, the most difficult issues tend to be those that concern either money or the children. However, there is another issue that seems like it could be a simple one, but it is one which touches on both division of property and child custody.

What does a couple do with their life insurance? In many families, the high wage earner carries the big policy and the other spouse might carry just enough life insurance to pay for funeral costs. When a couple divorces, the life insurance beneficiaries as well as the amount of coverage will typically change as well.

According to industry experts, most states require that the ex-spouse who is paying for child support be required to carry term life insurance. Whether or not the other ex-spouse carries term insurance is a personal matter.

However, who is the beneficiary of that insurance? Does that ex-spouse trust a 19-year-old and 20-year-old to act responsibly if they are the beneficiaries of an insurance payout? And what if the policy lapsed during the divorce proceedings? What if the ex-spouse who is paying child support is no longer insurable at a reasonable rate?

It is a wise idea to put insurance on the "to do" list when working through these issues with an attorney. Insurance experts see the following common divorce-related mistakes during divorce.

  • Underinsurance: Make sure that the divorce agreement not only states that there will be insurance, but also that it is of an adequate amount.
  • Lapsed coverage: It is a good idea to make sure that the beneficiary is the one notified if a policy has not been paid and is about to lapse. If not, the beneficiary could think that there is a policy in place, only to find out that it lapsed years ago.
  • Beneficiary: Some policy holders will try to change the beneficiary to a new spouse, rather than the ex-spouse and parent, despite what the divorce agreement dictates. If the beneficiary is the policy owner, then only the owner can make changes, although the insured makes the premium payments.

There are many issues related to the division or property and child custody or child support. Insurance beneficiaries and coverage is just one of them.

Source: Life Insurance News, "Life insurance and divorce - what to do with a term policy?" Chris Taylor, July 23, 2012

For more information about property division, please visit our law firm's Massachusetts division of property page.

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