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Divorce and the life insurance beneficiary

By Ronda Bradley

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Make sure your life insurance beneficiary designations are in order. These arrangements are easily overlooked in the event of divorce.

While we all dream of happily ever after, various sources reveal that in the U.S. approximately 50 percent of first marriages, 64 percent of second marriages and 73 percent of third marriages will end in divorce. These staggering numbers highlight an issue that may be overlooked in the process – life insurance and beneficiary designations.

Review life insurance beneficiary designations

Divorce can have a major impact on a life insurance policy when a former spouse is designated as the beneficiary. The beneficiary will not be affected by the divorce if the:

  • divorce decree or property settlement includes the life insurance policy
  • policy includes divorce or marital status language (ask your independent life insurance agent about your specific policy)
Check your beneficiary designation early

It is critical to review your life insurance policy and beneficiary designations when you go through a divorce.

Currently, 30 states have laws that automatically revoke the beneficiary designation to a former spouse after the divorce is final. If the insured person dies and a former spouse is named as beneficiary on the policy, the proceeds may go to either the contingent beneficiary or to the deceased’s estate if there is no contingent named. An exception may be made when the policy is part of the divorce agreement.

If you have elected a former spouse as a beneficiary, but have not addressed this in the property settlement or divorce decree, you may want to consider reconfirming your former spouse as beneficiary. Although some state statutes are not completely clear that reconfirming the beneficiary will have the desired effect if the death benefit is litigated, it is best to reconfirm your intentions for the death benefit so that the life insurance company has this information.

Individuals going through a divorce should be aware of the possible difficulties of beneficiary designations and seek the advice of a divorce attorney so the insurance proceeds can be addressed properly in the court settlement.

Life insurance represents the last chance to tell family members that they are special. Make sure your last gift is delivered as intended.

For more information about life insurance products to protect your family, see your local independent insurance agent.

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