Life Insurance and Divorce: How to Fight a Denied Claim
Life Insurance and divorce
Going through a divorce is never easy. It is a difficult time both emotionally and financially. And while a family law attorney will help you navigate through the divorce process, there are some things that you can (and should) handle now to protect yourself in the future. One of such things is bringing up life insurance during divorce negotiations.
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Life insurance is an important financial tool that cannot be left out during divorce. Unfortunately, I receive many calls from divorced women who cannot get life insurance proceeds after their ex-husbands’ death because either their life insurance policies were never mentioned during the divorce and, therefore, not included in the final judgment of divorce or they did not make necessary changes to their life insurance policies post-divorce.
Needless to say, expert life insurance advice will save you a lot of headache in the future. Not only will it ensure that you continue to receive alimony and child support payments after your former spouse’s death, but it will also protect your family from a potential wrong distribution of life insurance proceeds following your death. While I cannot address here all possible life insurance issues that may arise during a divorce, I will provide you with some basic tools to keep in mind if you are contemplating or going through a divorce.
Life Insurance and Child/Spousal Support
If your soon-to-be ex-husband pays child support or alimony after divorce, one of the ways to continue to receive those payments after his death is to make sure he is ordered to buy and maintain a life insurance policy with you and your children as beneficiaries. If your children are minors, you need to strictly follow the insurance company’s rules for making minors beneficiaries. In addition, the language in the divorce decree needs to be specific as to the amount of life insurance proceeds to be paid in the event of his death. Finally, consider asking to be designated an irrevocable beneficiary. It means that the policy owner will not be able to change beneficiaries later. Consulting a life insurance lawyer is a great step towards achieving greater protections in the future.
Group Life Insurance Policy Beneficiary Designations
Many people enroll into group life insurance policies at work. Most group policies are ERISA governed plans. ERISA is a federal law that offers wide protections. One of such protections is an ability to designate a beneficiary. It means that an employee can choose anyone to be a beneficiary and this designation may survive a divorce, a state court order or a conflicting state law. What it means to you is this: even if you have a divorce decree that obligates your ex-husband to keep you as a beneficiary on his group policy, he may still change his beneficiary later and a court may find that you have no recourse, because your divorce decree is a state court document that is in conflict with ERISA. One way to protect yourself from this possible scenario is to draft a marital settlement agreement that would comply with ERISA requirements.
If you have a group life insurance policy on your life and still have your ex-husband as a beneficiary, he will most likely collect the life insurance proceeds in the event of your death. If this is not your intent, you need to contact your life insurance company and your employer and change the beneficiary designation on your policy. It is important to follow up with both of them in writing to make sure the change was processed correctly.
Finally, if you have a group life insurance policy through your employer and your husband is covered as your dependent, most likely he will be automatically disqualified as your dependent on the date of your divorce. Keep in mind that he may not be covered even if you continue paying premiums for coverage on your ex-husband through your employer. You will need to inform your HR department of the change in your marital status.
State Laws Revoking Former Spouses as Beneficiaries
Many states have enacted laws that automatically revoke a former spouse as a beneficiary on a life insurance policy. This means that if you and your spouse verbally agreed that he would keep you a beneficiary on his policy and if you live in one of the states that have enacted such laws, the insurance company will deny your claim, because your beneficiary status automatically stops on the date of your divorce.
To avoid getting your claim denied and to plan your financial future post divorce, consult a life insurance lawyer. You can read more about life insurance and divorce on my website life-insurance-lawyer.com.
Tatiana Kadetskaya is an insurance attorney specializing in life insurance, ERISA disputes, interpleader cases and beneficiary contests. She also writes about these topics on Life Insurance Lawyer Blog. As a parent, Tatiana understands the importance of strategic life insurance planning that provides protections for children.