Life Insurance and Divorce Property Settlements

Divorce is never an easy matter, with there being so many people and assets to consider. With divorce rates in Australia at around 40%, it's more and more likely  that you, or people you know will end their marriage in divorce.

People often take out life insurance policies when they are first married or have started their family. They will most likely have a joint policy and will have each other as automatic beneficiaries.

Deciding what to do with your life insurance policy, is another thing to add to the to-do list in a divorce settlement. Your options really depend on what type of policy you have.

It's not as simple as just transferring some details. Although if you have a new address, new phone number or new bank accounts, these details will need to be updated during the process.

The best case scenario for you as a couple who is divorcing would be that you have separate policies. Your policies are not joined; therefore all you need to change is the beneficiary for the policy. You can change the beneficiary to your parents, siblings or in most cases people will change it to their children.

If however, you have a joint policy, that's where the situation becomes a little bit more difficult.

If you have taken out a level policy type, where your premiums remain the same from the age that you take it out from, you both might be unwilling to cancel this type of policy. We have found before, couples who are still on good speaking terms have simply kept their insurance policies, to avoid having to reapply.

Your health may have decreased dramatically since you took out your insurance, so this may be another reason as to why you don’t want to keep the policy. If you reapply with a decreased level of health, you may have loadings or exclusions placed onto your new policy, which weren’t there before.

If you are not on speaking terms with your ex-partner however, or simply wouldn't be comfortable with keeping the same insurance policy, it is possible for one of you to keep the policy as a single, if you are able to decide who would like to keep it.

Your final option is to both cancel your joint policy and reapply separately. While this can be frustrating, for some couples this is the only option.

You should always speak with your financial adviser or insurance agent before cancelling any policies to see exactly where you stand and what your options are.