Joint life insurance policy after divorce

Unfortunately, divorce and separations happen, but what impact will this have on your life insurance policy?

If you and your partner have both taken out single policies, the effects of a divorce will be minimal.

But with 40% of all policies being joint policies[1], what happens then? Will the cover remain in place or will you need to cancel your life insurance?

The options available to you will depend on the terms of your policy. Some policies include a ‘separation benefit’, but this isn’t offered by every insurer.

If you find yourself in a position where you need to secure a new policy, Reassured can help you to compare multiple quotes from some of the UK's leading providers.

Keep reading to find out everything you need to know about joint life insurance after divorce…

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What happens to life insurance after a divorce?

Deciding what to do with your joint life insurance policy after a divorce is completely up to you and your ex-partner.

There are typically three main options available to those with a joint policy who are going through a divorce:

  1. One party takes over the existing policy and the other party takes out a new policy
  2. The joint policy is split into two single policies (not available with all policies)
  3. The policy is cancelled and both parties find new cover

Taking over the policy

You’ll need to come to a mutual agreement with your ex-spouse about who’ll take over the policy.

The policy will then be signed over to the chosen party through a legal document.

Whoever takes over the policy will be responsible for paying the monthly premium.

They’ll also be able to choose new beneficiaries if their ex-partner is named as a beneficiary.

Please note, that not all providers will offer this option.

Split the policy

In some cases, it’s possible to split a joint life insurance policy into two single policies in the event of a separation.

This is a known as a ‘separation benefit’ or ‘separation agreement’.

It allows you to easily split the policy without having to provide any new medical information.

When using this benefit, you’ll need to provide evidence of your divorce or separation – usually within a specified time frame.

Please note, not all insurers offer this option. To find out if your joint policy has this benefit, you can check the terms and conditions of your policy or contact your insurer.

Cancelling the policy

Alternatively, if an agreement can’t be made over who’ll take over the policy or the separation benefit is not available, you have the option of cancelling the policy.

Once the policy has been cancelled, both parties will then be able to take out their own life cover.

New policies can accommodate any changes in your financial obligations as a result of the divorce.

However, you may experience higher premiums due to older age and having to provide new medical information.

If you find yourself needing new cover, comparing quotes is essential to securing a policy that meets all of your needs at a price that’s within your new budget.

At Reassured we can compare quotes from some of the UK's leading insurers to find you our best deal.

Cancelling a joint life insurance policy

If you’ve explored all other options and decide that cancelling your joint life insurance policy is the best route, you can do this by contacting your provider directly.

You shouldn’t be charged a cancellation fee, but all the premiums you’ve paid in won’t be refunded.

Once you’ve cancelled your policy you may wish to arrange new life insurance if it’s still needed, for example, to protect your children.

Setting up a new life insurance policy

Getting a divorce may bring about some big life changes.

These life changes may have an impact on your financial obligations and it’s likely the amount of cover you require after a divorce may be different to when you were married.

If you’re cancelling your joint policy and are looking to take out a new policy, it’s likely your provider will try and persuade you to take out a single policy directly with them.

However, this may not be the most cost-effective solution.

Comparing quotes from various providers is essential to securing a suitable policy for your new circumstances.

At Reassured we can compare quotes from some of the UK's leading providers and present you with our best deals.

How much life insurance do you need?

Work out how much life insurance you may need based on your current financial commitments and what you want your policy to cover. Simply fill in the fields which apply to you for an instant calculation.

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£137,934 is the estimated mortgage debt per household in the UK.

The purchase of a home is likely to be the largest financial commitment any of us will make in our lifetime. Your life insurance should cover your remaining mortgage balance to allow your loved ones to stay in the family home should anything happen to you.

Source: Moneynerd.co.uk
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The average monthly household budget in the UK is £2,548 (that’s £30,576 per year), which is spent on transport, food & drink, utilities (gas, electricity, water etc), clothing, council tax and leisure activities.

With energy prices hitting a record high and the cost of living rising sharply in the UK, you may wish to factor in utility bills and family living expenses into your cover.

Source: Nimblefins.co.uk
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The average personal debt of UK adults has risen to £34,566 (not including mortgage debt), with credit cards, personal loans and overdrafts being the most common forms of debt.

Factoring in any debts into your life insurance cover means that, if they need to be paid back from your estate after your passing, your loved ones won’t miss out financially.

Source: Money.co.uk
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According to SunLife, the average cost of a funeral in the UK is £3,953 (with the overall cost of dying at £9,200).

Funeral costs have increased by 116% since 2004 and are a significant cost which should be factored into the amount of life insurance you secure.

Source: SunLife.co.uk
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When factoring in cover for your children, you may wish to calculate the amount based on how long it is until they reach financial independence.

This could include childcare (£7,000 per year for part-time care), school expenses (£1,519 per school year for uniforms, lunches, stationary etc), as well as an additional sum for further education (this could be a contribution of up to £5,000 per year).

Sources: Daynurseries.co.uk, Primarytimes.co.uk & Savethestudent.org
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2 in 5 adults say they are relying on an inheritance to fund their retirement.

Factoring in an inheritance to your sum assured could allow loved ones to live a more financially comfortable life. Alternatively, you could leave a cash gift to a charity of your choosing.

Source: Moneyage.co.uk
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If you’re lucky enough to have your own savings or are part of the 30% of UK residents who already have a life insurance policy in place, this can provide financial protection for loved ones.

By entering your current cover, savings or death in service amount you can reduce the sum assured you require.

Source: Scottishbusinessnews.net
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Is life insurance still valid after divorce?

Yes, a joint life insurance policy is still valid after a divorce.

Unless you choose to cancel the policy, your cover will remain in place until the end of the term.

You’re not legally obligated to inform your insurer of your divorce, however, it’s best to do so to find out what options are available to you regarding your policy.

Mortgage life insurance after divorce

Often a joint life insurance policy is taken out by couples to help protect a shared mortgage.

If one partner were to pass away, the surviving partner may struggle to continue making mortgage payments.

A life insurance policy is typically taken out to help ensure the surviving partner can remain in their home.

When going through a divorce you may decide to sell the house and you and your ex may find new places to live.

In this case, it’s likely you may want to cancel your life insurance policy and take out new cover to protect your new living situation.

Alternatively, you may come to an agreement for one of you to remain in the house.

In this case, you could choose to sign the policy over to the party who has taken over the mortgage.

If you’re looking for new life cover to protect your new home, Reassured can compare quotes from multiple providers to find you suitable cover.

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Life insurance beneficiary after divorce

With a joint life insurance policy, it’s likely that each spouse would have named each other as a beneficiary as a way of protecting shared assets.

However, if you’re going through a divorce, it’s likely you’ll no longer want your ex-spouse as a named beneficiary.

If you’ve made the decision to cancel the policy, this won't be an issue as you can take out a new policy and name whoever you’d like to benefit from your life insurance pay out.

However, if you’ve taken over the joint life insurance policy, you’ll need to contact your provider.

They’ll be able to provide information about the process of changing your beneficiary.

If you’ve written your life insurance in trust, this may cause some complications.

If the policy was written in an absolute trust, it’s unlikely you’ll be able to change the beneficiary on the policy.

If the policy was written in flexible or discretionary trust, it’s likely you’ll be able to make the necessary changes to the policy.

Can husband keep wife on life insurance after divorce?

Unless you choose to change the named beneficiary on the policy, your ex-spouse will remain as the named beneficiary.

This means they'll benefit from your pay out if you were to pass away while the policy is active.

Can an ex-spouse collect life insurance?

If you choose to keep your joint life insurance policy after a divorce and your ex is still listed as a named beneficiary, they’ll be able to make a claim on the policy after your passing, (if you pass away during the term).

This means they’ll receive the lump sum pay out from the policy.

It’s important to contact your provider when going through a divorce as they’ll be able to provide you with all your options regarding your joint policy.

This means you can cancel the policy or make any necessary changes to your named beneficiaries.

Is life insurance considered marital property?

No, a life insurance policy is not marital property.

In the event of a divorce, you and your ex-partner will need to come to a mutual decision about what to do with the policy otherwise it will simply stay in place until the end of the term.

Divorce statistics UK

  • The divorce rate in the UK is estimated to be 42%
  • ‘Unreasonable behaviour’ is the most common reason for divorce
  • The average age for divorce in the UK is 43.9 for women and 46.4 for men
  • The average length of a marriage before divorce is estimated to be 11.9 years[2]

Compare life insurance quotes after a divorce

We hope this article has provided you with some information about what you can do with a joint life insurance policy after a divorce.

If you find yourself in a position where you’re looking for new life cover, why not contact Reassured?

Our award-winning team can provide you with a choice of possible options from a panel of top UK insurers.

Comparing quotes through Reassured can not only help you to save time, but it can also help you save money.

Get in touch for your free, no-obligation quotes.

Life insurance through Reassured starts from as little as 20p-a-day.

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Sources:

[1] https://www.moneyexpert.com/life-insurance/divorce/

[2] https://www.standard.co.uk/news/uk/most-divorces-london-uk-census-data-b1062398.html

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