Generally, one spouse will often list the other spouse as the beneficiary on a insurance policy. Life insurance is often a forgotten asset in many divorce claims. As such, there are several issues that arise during a divorce where a life insurance policy is involved.
Typically, one spouse will own a life insurance policy on his or her own life, and the other spouse will be listed as the beneficiary. In the event of a divorce, the beneficiary/spouse of a life insurance policy is not automatically removed from the policy like he or she may be from a will or estate plan. However, a divorce decree may have a provision that changes the beneficiary to a life insurance policy explicitly. Otherwise, insurance companies often have strict requirements in place to make a change of a beneficiary. Some companies require certain forms to be filled out and notarized to make the change, and any error in the process will void the changes an owner attempts to make.
Life insurance can also be considered important in a marriage where one spouse is paying the other spouse support after the divorce. In a case like this, the divorce settlement may contain a provision that forces the paying spouse to keep the other spouse as the beneficiary by not allowing a change. A divorce settlement may also force the paying spouse to take out a life insurance policy for a certain amount so that the support payments can be guaranteed in the event of the death of the paying party. If going through a divorce, it is important to keep in mind how life insurance and divorce can affect each other.