Life Insurance After Divorce or Separation

Divorce reorganises a household's finances and leaves the protection arranged for the old one untouched.

There is often a maintenance arrangement, sometimes a mortgage transferred into one name, frequently children whose costs are now split across two homes. All of it depends on both adults continuing to earn, and one of them continuing to pay.

Meanwhile the life policy taken out when you bought the house together is still running, still paying a premium, and still naming somebody you are no longer married to.

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The short answer

Divorce leaves two financial obligations that depend on one person staying alive and able to work: maintenance and, usually, a mortgage one party has taken on alone. Existing policies normally still name the former spouse as beneficiary, and almost nobody changes them. Reviewing who is named, and insuring any maintenance that was ordered, are the two practical jobs.

What this changes

Maintenance payments depend entirely on the payer being alive and able to work
One party may have taken the mortgage on alone, on a single income
Existing policies usually still name a former spouse as beneficiary or are written in trust for them
Pension nominations are separate from the divorce settlement and are commonly overlooked
Children's costs are now spread across two households rather than one
A court order may require one party to maintain life cover, and nobody may be checking that they have

The bit people miss

Maintenance is almost never insured, and it is the thing most likely to disappear. If the paying party dies, the maintenance stops: there is rarely any provision in a settlement that continues it, and the receiving household loses an income it was depending on. Life cover written on the payer's life, for the amount and duration of the maintenance, closes that. In some settlements the court orders exactly this, and it is worth checking it was actually put in place rather than agreed.

Check Who Your Policy Actually Pays

This is quick, free and almost never done, and the consequence of not doing it is severe.

A life policy written in trust for a spouse continues to be written in trust for that person after the divorce unless it is changed. A pension nomination form filled in during the marriage still names the same person. Divorce does not automatically revoke either, and the result is a policy that pays a substantial sum to a former spouse rather than to your children or your current partner.

Changing a nomination takes minutes. Changing a trust may need a deed and is worth taking proper advice on. Both are far easier to deal with now than they are for the people left behind.

Insure The Maintenance, Not Just The Mortgage

Settlements deal with assets carefully and with the continuation of income barely at all.

A maintenance arrangement is a stream of payments that exists only while the payer is alive and earning. Nothing in the settlement makes those payments survive their death, so the receiving household can lose a significant income with no notice and no recourse. For a parent raising children on maintenance plus part-time work, that is the difference between managing and not.

The fix is straightforward: life cover on the payer, for roughly the total of the remaining maintenance, running for as long as the obligation does. Some court orders require it. Where they do, it is worth confirming the policy actually exists and is being paid for, rather than assuming.

What usually fits, and why

Life cover on the maintenance payer

The most overlooked piece. If maintenance was ordered or agreed, it should be insured for its amount and duration, because it stops entirely if the payer dies.

Income protection

Maintenance usually still has to be paid if the payer is ill rather than dead, out of an income that is no longer arriving.

Critical illness cover

Particularly relevant where one party has taken on the whole mortgage alone and has no second income to fall back on.

Common questions

Does divorce change who my life insurance pays?+

No, and that is the problem. A policy written in trust for a spouse keeps paying to that person unless it is changed, and a pension nomination made during the marriage still names them. Divorce does not automatically revoke either. Changing a nomination takes minutes; changing a trust may need a deed and proper advice.

What happens to maintenance if the payer dies?+

It generally stops, and there is rarely any provision in a settlement that continues it. The receiving household loses an income it was depending on, with no notice and no recourse. Life cover on the payer, for roughly the total of the remaining maintenance and running as long as the obligation does, is what closes that gap.

The court order says my ex must have life cover. Is it in place?+

Worth checking rather than assuming. Orders of that kind are agreed in a settlement and then have to be actioned, and policies lapse when premiums stop. You are entitled to understand whether the cover required by an order actually exists and is being maintained. Your solicitor is the right person to pursue it if it is not.

I have taken on the mortgage alone. What should I look at?+

Income protection usually does the most work, because one income now carries a debt that two used to, and there is no second earner to absorb a few months off. Critical illness is worth considering alongside, since a lump sum can reduce the mortgage to a level a single income can manage permanently.

Should I cancel the joint policy we had?+

Not before anything replacing it is in force, and look at what it actually is first. A joint policy usually pays out once, on the first death, and ends, which may suit neither of you now. Two separate policies are often the better shape after separation, but the old one should only be cancelled once the new cover is accepted and running.

Cover that often goes with this

The gaps we most often find sitting next to this one.