Divorce is very difficult whenever it occurs in your life. Sorting your finances after divorce can also be a daunting process, especially when your ex-partner dealt with that sort of thing.
Insurance policies are one thing that can get forgotten when going through a divorce. Depending on whether you have children, will determine how you would want to change the beneficiary of the policy. If you have young children, you may still want your ex to be the beneficiary to a policy.
Insurance policies are usually dealt with as part of a consent order so you will have evaluated the policies.
Individual life insurance policies
If you each have individual policies, you may not need to make major changes. However, you should check that you’ll still have the right level of cover following the costs and financial changes of the divorce – especially where there are children involved.
You will probably just want to change the beneficiary of an individual policy.
Joint life insurance policies
Unless you have what’s called a ‘separation benefit’, joint policies can’t be divided.
In this instance, you need to decide who will take over the joint policy as a single policy or you will need to cancel it entirely. That will mean the other partner may not have any insurance.
It is advisable to compare the cost of taking over a joint policy compared to starting a new, single policy, as this might be the cheaper option.
The person taking on the policy will pay the premiums going forward. They will have sole control over who benefits from any payout.
If you want to ensure that your children will benefit from a payout, you can have the policy put in a Trust.
Do not rely on any other legal document (such as a will) to change the beneficiary of any life insurance policy. You must make sure beneficiaries are named on the policy itself.
If you don’t have a beneficiary named on your policy in the event of a payout, the money can be paid into the insured person’s estate and shared out in a will.
Mortgage life insurance policies
If the insurance is on a joint mortgage, you should make sure there is enough cover to pay off the mortgage if they die.
Working out how much you need for mortgage life insurance should be straightforward. If you’re considering other beneficiaries, such as children, you’ll need to add them into the equation.
Remember that the choices open to you will depend on various factors such as your age, health and employment. If you feel unsure about these decisions, consult an independent financial adviser.
Death in service insurance
Some employers provide death in service insurance. This insurance pays out a lump sum if you were to die during your employment.
When you start employment, you normally have to say who you’d like to receive this lump sum. So you will need to ensure you change the beneficiary as required.