Divorce and life insurance: the key points

Divorce can be both financially and emotionally draining, not least because you’ll need to untangle the financial ties of your married life. As well as the division of assets, property and possessions, divorce can also have an impact on your life insurance policy.

Understanding your options for life insurance in divorce might help make the process simpler and ease some of your worries.

Written by

Faith Archer

Insurance expert

Last Updated

22 NOVEMBER 2022

6 min read

What happens to life insurance after divorce?

The effect of divorce on your life insurance will depend on the type of policy you have, who pays the premiums and when it expires. Start by checking whether you hold:

A single policy
A joint policy
A policy that’s held ‘in trust’
A policy tied to your mortgage.

We outline how each type of policy can affect your situation after divorce.

What happens to single policy life insurance after divorce?

The rules on life insurance are pretty straightforward if you and/or your ex-partner have single policies. If this is the case, the only change you might need to make is the name of your beneficiary – that is, the person meant to receive any pay-out.

Most policies allow you to change your beneficiaries at any time for whatever reason. After your divorce, you might want your money to go to your children, relatives or a new partner if you die, rather than your ex. On the other hand, if your ex-partner is the primary caregiver who relies on your income for child maintenance, you might prefer to keep them as the beneficiary.

Once your circumstances change, you should review your life insurance to ensure you have enough cover in place – especially if there are children involved. You may need to increase the size of the potential pay-out, known as the ‘sum insured’.

What happens to joint policy life insurance after divorce?

Joint life cover is trickier than single policies if you split up.

Joint life insurance policies pay out when the first person covered by the policy dies, but not on the death of the other person. They can’t be split into two separate policies unless you specified a ‘separation benefit’ when you set up your policy. This isn’t offered by all providers, so you’ll need to check the policy details or ask your provider. You may also need to ask within a fixed time frame after the divorce.

No separation benefit? Then you have two choices on divorce:

One of you takes over the policy and the second person takes out a new policy if they still need life insurance.
The policy is cancelled and you both choose your own life insurance to suit your new situations.

For one of you to take over the policy, you’ll both need to agree to it and sign a legal document confirming the new situation. Whoever takes over the policy would then be responsible for paying the premiums and have total control over who benefits from any pay-out. To make sure that any children would benefit from a pay-out, without the money being tangled up with probate and any inheritance tax, you’ll need to put the policy ‘in trust‘.

If you can’t come to an agreement, you’ll probably need to cancel the joint policy entirely. You don’t always need consent from your partner to cancel a joint life insurance policy. However, some providers require cancellation letters signed by both people – so check what’s needed first. Just be aware if you do cancel without your ex knowing, it could have huge consequences for them and any dependents if they die believing they had life insurance when they didn’t.

If you opt to cancel joint cover, you’ll both potentially need to arrange new life insurance policies based on your new situations. You’ll probably want to make sure your new policies are in place before you cancel any cover – just in case.

Your life insurance provider should be able to advise you on any costs involved in making changes to your policy. If you’re taking out a new policy, it’s worth comparing premiums as these can vary among providers. New cover is likely to be more expensive if you’re now older and have developed health conditions since arranging the original insurance.

What happens to a life insurance policy ‘held in trust’ after divorce?

Depending on how you set up the trust, divorce can cause some complications if the beneficiary is your ex-spouse or civil partner:

If the policy is written in absolute trust, it’s unlikely you can change the beneficiaries
If the policy was written in a flexible or discretionary trust, you should be able to change the beneficiaries.

It’s a good idea to talk to your divorce lawyer or the solicitor who set up the trust to see what your options are.

It’s possible to write a joint policy in trust, but this kind of policy isn’t usually taken out in this way. Typically, only single life insurance policies are written in trust.

Find out more about writing life insurance in trust.

What happens to mortgage life insurance after divorce?

If you have a joint life insurance policy on your mortgage and decide to sell the property when you divorce, you may no longer want or need the policy. You’ll need to decide what to do between you.

But if one of you decides to buy out the other, it might make sense to sign over the policy to the new owner. Alternatively, cancelling and choosing a new mortgage life insurance policy may be a better solution, although the premiums may now be more expensive if you are older and less healthy than when you arranged the original policy.

In some cases, divorced parents may agree to keep joint ownership of the property so that children can remain in the family home. If this is the case, you might decide to keep the life insurance policy as it is, especially if you’re both contributing to the mortgage.

MORE TIPS ABOUT DIVORCE AND WILLS

If you’re going through a divorce or separation, don’t forget to amend your will if you don’t want everything to go to your soon-to-be-ex should you go under a bus. Consider changing your executor or trustee, if you had previously named your ex.

You might also want to have a say on what happens to your assets if your former partner re-marries.

Frequently asked questions

What happens to life insurance on separation?

If you separate after getting life insurance, the policy will stay the same unless you make any changes. In short, life insurance providers don’t distinguish between separated couples and divorced couples.

This means that if you’re separated from your partner and they’re named as the beneficiary, they’ll receive the pay-out unless you change your policy.

How does separation benefit work?

Some joint life insurance policies offer a separation benefit or separation agreement option that you can include when taking out your policy. This allows you to divide the policy into two separate policies if you divorce. Not all policies offer this feature, though, and there may be age restrictions – it’s typically available to customers under the age of 55.

Do I need to tell my insurance provider if I’m getting divorced?

No, you’re not legally obliged to tell you insurance provider about your divorce, but you should check how your cover might be affected if you divorce.

Can my former spouse collect my life insurance?

If your ex-partner remains the named beneficiary, they’ll automatically get the pay-out if you die while the policy is still running – even if you’re divorced. This suits some families as a way of making sure any dependents are protected.

But if you don’t want your ex-spouse to receive the pay-out you should contact your insurance provider and update the beneficiary, clearly stating that you want your ex-spouse removed following separation or divorce.

What happens to death in service benefit after divorce?

If you have death in service benefit from your employer and nominated your spouse as the beneficiary, your ex might still get the pay-out unless you change who’s to receive the money.

That might be fine if you have kids, but if you don’t, then it should be quite simple to change your death in service beneficiary via your HR team or online employment benefits portal.

Can I take out a new life insurance policy on my ex?

Possibly, but it will depend on the circumstances – you’d need to be able to show there would be some financial loss if they died. For example, where dependent children are involved, one person in the former couple may rely on the other for income – such as child maintenance.

In this case, you could take out a life insurance policy on your ex-spouse because you have an ‘insurable interest’ in their life. These types of policies are called ‘life of another’.

Essentially, you’d be paying for the life insurance policy based on the life of your ex-spouse. The policy would belong to you and any pay-out would be made directly to you. However, you must get your ex’s permission before you can take out this type of cover.

How do I cancel a joint life insurance policy?

Contact your insurance provider if you want to cancel a joint life insurance policy. You don’t always need your ex-partner’s consent to do this, although you should let them know in case they want to arrange alternative life cover.

Some providers will charge a cancellation fee, while others will let you cancel free of charge; it depends on the provider. Just be aware that you won’t get back any of the premiums you’ve already paid.

You should consider whether you need to take out alternative cover that offers similar protection for your new situation – ideally with no gap between policies.