Divorce is a major life event that can affect a client’s life insurance policy. A divorce should be a reminder for policyowners to review their coverage and beneficiary designations to make sure their policy continues to reflect their wishes.
Here are a few things agents should keep in mind when working with clients who have gone through a divorce.
Encourage a Policy Review After a Divorce
When a client goes through a divorce, encourage them to review their life insurance policies and determine whether any updates are needed.
This may include reviewing:
- Beneficiary designations
- Policy ownership
- Contact information
- Other policy information that may have changed
If a client mentions a divorce during an annual review, treat it as an opportunity to make sure their policy information is current.
Beneficiary Changes May Require Additional Information
If a policyowner wants to change a beneficiary following a divorce, additional information or documentation may be needed.
Depending on the circumstances, state requirements and the terms of the divorce may affect how a beneficiary change is handled. This can include situations involving community property states or divorce documents that specifically address a life insurance policy.
A divorce decree, settlement agreement, or other court-filed documentation may be requested. If divorce documentation is submitted, it is important to provide the complete document. A partial copy may not contain all of the information needed to determine whether the policy is affected.
Divorce Can Affect Beneficiary Designations at Claim Time
A divorce can also affect the handling of a life insurance claim.
In some states, laws may automatically affect a former spouse’s rights as a beneficiary following a divorce. As a result, the beneficiary listed on the policy may not always be the person ultimately entitled to receive the proceeds.
For this reason, agents should encourage clients to review their beneficiary designations after a divorce rather than assuming that an existing designation will continue to produce the intended result.
What if the Client Wants Their Former Spouse to Remain the Beneficiary?
If a client wants a former spouse to remain their beneficiary after a divorce, encourage them to review and update their beneficiary designation after the divorce to clearly document their current wishes. Additional considerations may apply depending on the terms of the divorce and applicable state law.
Community Property Considerations
Community property laws may create additional considerations when a spouse is being removed as a beneficiary or when other policy changes are requested following a divorce.
Because requirements can vary based on the circumstances, additional documentation may be needed before a requested change can be completed.
The Takeaway for Agents
When a client goes through a divorce, encourage them to review their life insurance policy and make any necessary updates. Keeping beneficiary designations and other policy information current can help ensure the policy reflects the client’s wishes and avoid complications later.
The companies of National Life Group and their representatives do not offer tax or legal advice. For advice concerning their own situations, clients should consult with their appropriate professional advisor. TC9123813(0926)1
