Life Insurance Claims and Divorce

What happens to a life insurance claim when a divorced person dies? What happens to a life insurance spousal beneficiary when the insured divorces? Who gets the death claim in states that automatically remove an ex-spouse as beneficiary upon divorce? We get calls from spouses and ex-spouses all the time asking these questions. Many of these people are in shock that they are being denied life insurance benefits they thought they’d be getting.

There are so many misunderstandings about life insurance claims and divorce. Here we try to clear things up by examining some of the more common facts and failures of how divorce effects life insurance claims.

There are several common questions that come up regarding life insurance claims and divorce. Such as:

What happens after a divorce when the ex-spouse was not removed as a claim beneficiary?
Who gets the death claim if the ex-spouse remarries but the other ex-spouse is still named as the beneficiary?
What happens when the insured wants an ex-spouse to remain as the beneficiary but he/she lives in a state that automatically revokes the beneficiary designation upon divorce?
What is the effect of a divorce decree that requires an ex-spouse to maintain life insurance for the other ex-spouse or children?
How does divorce effect a life insurance death claim when the policy was purchased as part of an employer plan versus when it was purchased individually by the insured spouse?

This article looks at all of these questions and tries to briefly answer them.

One thing we always advise is: don’t try to dispute a life insurance beneficiary designation without being represented by an expert in life insurance claims. Even life insurance claim examiners get the rules and regulations wrong regarding who is entitled to a death claim when a spouse or ex-spouse dies. Don’t trust that the insurance company will help you get the money. They won’t. We will.

If you’re facing any of these situations call us for help now, before the insurer pays the wrong beneficiary and your rights to the claim are ignored.

Call Us: 888-428-4868

Forgetting to Remove an Ex-Spouse as the Life Insurance Beneficiary

It happens. In order to remove someone as a beneficiary you have to notify the insurer in writing and they have to acknowledge the change. Sometimes people simply forget to do this.

There are a number of considerations when this occurs that will determine who gets the death claim, but the worst outcome is when the money goes to someone against the wishes of the insured. We’ve seen many cases where a death claim is paid to a person the insured divorced decades prior and has had no contact with, all the while the surviving spouse gets nothing.

The question is, what can you do when an ex-spouse is still the named beneficiary to a life insurance policy?

In these situations we look at state and federal laws, individual or employer life insurance rules, community property rules and automatic cancellation statutes. It’s complicated, but often we’re able to rectify the oversight and get the money paid to the current spouse.

Automatic Cancelation of Beneficiary Designation When Spouses Divorce

Many states have adopted a process of automatically cancelling a spousal beneficiary designation when the couple divorce.

Which states have enacted the automatic revocation of beneficiary upon divorce? As of this writing there are 26 states: Alabama, Alaska, Arizona, Colorado, Florida, Hawaii, Idaho, Iowa, Massachusetts, Michigan, Minnesota, Montana, Nevada, New Jersey, New Mexico, New York, North Dakota, Ohio, Pennsylvania, South Carolina, South Dakota, Texas, Utah, Washington, and Wisconsin and Virginia.

What this does is automatically removes an ex-spouse from the beneficiary position when the divorce is final. Nothing has to be filed or told to the insurance company. When the death is reported the insurer will know the insured divorced and will refuse to pay the ex-spouse. This state statute is not well known and we field a lot of calls from distraught ex’s.

There are occasions when people divorce but agree that the ex-spouse should remain as the beneficiary. That’s absolutely allowed but there is a mandatory procedure for making such a decision effective. The insured must notify the insurer and rename the ex-spouse as beneficiary. The insurer will document the request, check it against the date of divorce, and honor it upon death. It’s not enough to just leave the beneficiary designation as it was before the divorce.

When a Divorce Decree Requires Life Insurance on a Spouse

Even with many states adopting the automatic termination of ex-spouse as beneficiary statute, there is a common event that overrides these statutes. It’s when a divorce decree requires an ex-spouse to keep insurance coverage for the benefit of the other ex-spouse — or children.

Such stipulations in a divorce decree take priority over the state statutes that automatically revoke a beneficiary designation.

In situations where a divorce decree says an ex-spouse must maintain life insurance for the benefit of the other ex-spouse (or children) the state’s statute will not apply. It’s vitally important to inform an insurance company that you have divorced and that you have a stipulation in the divorce that says you are the person who is to receive the death benefit.

To protect an interest in a life insurance claim we recommend the non-insured person take ownership and payment duties for the policy. This will allow the person who will ultimately receive the death benefit to make sure the policy stays paid and in good standing. We hear horror stories of how an insured ex-spouse let a life insurance policy lapse before they died and never told the beneficiary.

If ownership is not possible you should request to be named as a secondary notification person so any pre-lapse notice is sent to you as well as the insured.

Employer Life Insurance Claims and Divorce

When life insurance is bought thru an employer the rules of federal law apply. The set of rules that govern employer life insurance are known as ERISA. ERISA is federal rules, not state rules and they take precedent.

The application of ERISA rules, like other rules, causes a lot of confusion. In many situations ERISA actually protects a beneficiaries’ right to receive a death benefit even when that person is an ex-spouse and, even when the insured had remarried.

Adding to the frustration that group life insurance claims trigger is the common fact that no one at the insurance company verifies beneficiary designations at all. It’s all left to the individual to figure out. We have yet to encounter anyone who knew they had to rename their ex-spouse as beneficiary after their divorce. Sometimes there is no beneficiary named at all and the claim gets probated.

State Laws for Life Insurance Claims and Divorce

When life insurance is bought individually (not through work) the laws of a state apply to determine the proper beneficiary for the payout. If the insured lived in Texas, as an example, the rules for Texas would likely apply to any challenge to the death claim. But, if the beneficiary lives in California then the state rules that should apply to a beneficiary dispute should be California. This is an on-going argument and there’s not a concise answer. It may be the original state and it may be the new state.

It matters because each state has different rules and statutes for life insurance claims and divorce. Depending on a set of circumstances one state may be much more advantageous than another.

In Summary

There can be a lot of well intentioned plans that go wrong with life insurance claims after a divorce.

The confusion starts when the life insurance company tells you you’re not entitled to the death claim. But life insurers are not allowed to give legal advice or claim instructions to anyone. So, they just leave you hanging without any details as to who is getting the money or what you can do about it. Don’t give in to this awful treatment.

Call us, the Center for Life Insurance Disputes, if you’re being cut out of a life insurance claim from your spouse’s policy or your ex-spouse’s policy and you need qualified help.

We know the rules and statutes that apply to any given life insurance claim dispute and we will get you what you’re entitled to.

Phone: (888) 428-4868

Email: Contact Us

The Center for Life Insurance Disputes