What Does Happen To Term Insurance Plan Post-Divorce?

Getting divorced is a stressful, emotional, and difficult time. For many individuals, this means untying a lifetime of joint finances, managing their child's education, and dealing with the emotional difficulty of the split. Term insurance plans taken at the time when they were together as a married couple, need to be a part of the activity of dividing their marital assets. This article will discuss the status of term insurance after divorce.

Read more
Get ₹1 Cr. Life Cover at just
Term Insurance plans
Online discount
upto 10%#
Claim Support
Policybazaar is
Certified platinum Partner for
Claim Settled

#All savings and online discounts are provided by insurers as per IRDAI approved insurance plans | Standard Terms and Conditions Apply

Get ₹1 Cr. Life Cover at just
View plans
Please wait. We Are Processing..
Get Updates on WhatsApp
By clicking on "View plans" you agree to our Privacy Policy and Terms of use
We are rated
58.9 million
Registered Consumers
26.4 million

How To List Term Insurance Plans Among Different Assets? 

Upon filing a divorce, the couple generally makes a list of all the assets before deciding how all these assets are to be distributed. Any existing term insurance plans should be a part of this list. So, it is better to assign a financial advisor or planner to make sure that all the assets are listed. 

What Does Happen to Term Insurance Plans During Divorce? 

  1. Beneficiary

    A beneficiary gets benefits financially from the life of a policyholder, such as a spouse, children, or parents. Generally, either spouse lists the other as a beneficiary in their term insurance plan. The policyholder should change the beneficiary to someone having insurable interest while settling assets during divorce proceedings. This should be informed to the insurance company and change the beneficiary as soon as possible. 

  2. Nominee

    The nominee is an individual nominated by a policyholder to take care of the financial assets after their unforeseen demise during the policy term. In the case of marriage, this is generally a spouse. The policyholder should make sure to remove his/her divorced wife/husband as the nominee. Then, it can be assigned to another individual having an insurable interest. 

  3. Irrevocable Beneficiary

    This is the type of beneficiary that cannot be changed. This is selected when the insurance plan is issued. If your partner is an irrevocable beneficiary, the death benefit cannot be changed even after the divorce. 

Alimony and Child Support 

In case of divorce, the spouses could go for joint custody or sole custody. The term insurance plan plays an important role if the non-custodial parents are the first earner. Their term insurance cover will provide the custodial children and spouse financial help in case of the death of a primary earner. 

If in case the custodial ex-spouse is the first breadwinner, then it is a good idea to continue with their life cover to make sure the financial security of a family. Though, there are some cases in which custodial ex-spouse might think that the non-custodial spouse is not financially responsible or untrustworthy. This can be the other reason to make sure that the term insurance plan remains with them and that they pay regular premiums for the security of their children. 

Assignee of Policy 

An assignee is an individual who is assigned for both the liability and the benefit of the policyholder’s plan. Generally, a partner sets their counterpart as the policy’s assignee. After divorce, the policyholder needs clarification from the ex-partner to make any kind of changes about reassignment or nomination. So, it is important to reassign the plan by the spouse to the other before the proceedings of divorce get complete. 

Five things to know before buying Term Plan Five things to know before buying Term Plan

Married Women Property Act 

Let’s understand this MWP with the help of an example: 

Mr. Kumar has an Rs. 1 Crore term life insurance plan, with his children and wife assigned as the beneficiaries. After some time, the couple gets divorced and the husband keeps the beneficiaries. Subsequently, the husband passes away and it is found that Mr.Rao has a large amount of debt that should be cleared. In such cases, creditors can re-claim their money from the payout. 

Section 6 of the MWP Act ensures that these kinds of cases are avoided. If the husband files for a simple MWP Act while buying the term insurance plan, the insurance payout is secured from the debtors. This means that it does not become a part of any estate. 

The payout of the insurance is purely the property of the wife, ex-wife, and kids, and debtors cannot make any right about the surviving beneficiaries. 

Why Buy Term Life Insurance from Policybazaar Why Buy Term Life Insurance from Policybazaar

Insurance Tips To Follow After Divorce 

Here is a list of a few insurance tips that you should follow for ensuring that your financial future doesn’t suffer after divorce: 

  • Make sure that you discontinue any joint term insurance plan if you are the only individual that is paying the premium amounts. This may look like a difficult task but is very important because it ensures that there is major credibility to your claims after divorce. 

  • Buying an individual plan is the second step after filing a divorce as this will help to fulfill your dreams based on your financial capabilities and interests. 

  • Maintain a track of the premium amount paid towards a term plan until the lapse time is important. Doing this brings transparency to your records and helps you to prepare your independent financial budget. 

  • Make your own separate financial budget post-divorce and make sure that you change the appointed beneficiaries in your policy documents. 

How to Plan Finances After Divorce?

  • The foremost thing you should do is remove the name of your spouse as the nominee in a term insurance plan. The newly assigned nominee can be any blood relative

  • Plans can be settled based on the contribution of each spouse

  • Re-assess your insurance requirements, especially if you are a single parent. You might need to increase your life cover.

Why Buy Term Life Insurance from Policybazaar Why Buy Term Life Insurance from Policybazaar

Wrapping It Up!

A term insurance plan is not a primary task to be done during a divorce proceeding of a couple. In difficult situations like divorce, it sometimes becomes unseen. However, the consequences of not considering them can be expensive to the ex-partner and children or other beneficiaries/nominees. Therefore, to continue enjoying financial security, one requires to solve the matters associated with term insurance during such proceedings. It will be a tough call in such difficult times, but both parties should keep their emotion aside so that their financial future can be protected.

Different types of Plans

Term insurance articles

Recent Articles
Popular Articles
Tata AIA Term Insurance Login

26 Dec 2022

Tata AIA term insurance login portal offers the company’s
Read more
Why NRIs in UAE Should Buy Term Insurance Plans from India?

08 Dec 2022

Term life insurance plan secures the financial future of your
Read more
Best Term Life Insurance Plans in Singapore

07 Dec 2022

An NRI living in Singapore can easily buy the best term life
Read more
Bima Sugam

29 Nov 2022

Bima Sugam is an online marketplace that will offer its services
Read more
LIC Relaunched A Term Assurance Plan: LIC New Jeevan Amar

25 Nov 2022

Life Insurance Corporation (LIC) of India recently relaunched
Read more
LIC Term Insurance 1 Crore
LIC of India offers various plans to help you secure the financial future of your loved ones. In order to make
Read more
What Medical Tests are Required for Term Insurance?
Term insurance offers a sum assured to the beneficiary of the policyholder upon their death that can help them
Read more
Term Insurance: Tax Benefits under Section 80D
Term Insurance provides financial security and protection to your family in case of your unexpected death within
Read more
2 Crore Term Insurance Plan
The pandemic has surely generated a global panic and emphasised the importance of financial planning that would
Read more
Types of Deaths Covered and Not Covered by Term Insurance
A term insurance plan is the best way to ensure the financial well-being of your family members in case of any
Read more

View Plans
Download the Policybazaar app
to manage all your insurance needs.