What Happens to Term Insurance Plan Post Divorce?

In the journey of life, you hope to find a loving partner to walk together with through eternity. But life is unpredictable, and sometimes circumstances lead us down a different path, and you may find yourself facing the painful reality of divorce. It alters the course of your life, and along with emotional toll, it may impacts your financial and legal aspects, including insurance products like term insurance. Term insurance serves as a safety net and ensures financial protection during life’s uncertainties. And when it comes to a divorce, it becomes essential to understand what happens to this protective shield. In this article, we will delve into the details of a term life insurance policy after divorce, exploring the adjustments, considerations, and possibilities that arise when two life journeys diverge.

Understanding Term Insurance

Term insurance is a financial tool that is simple, effective, and powerful in providing a beacon of hope and safety to secure your family's financial future. If you pass away during the policy period, the insurance company will provide your family with a sum of money known as the sum assured. This payment will replace your income, ensuring that your family's financial needs are met without sacrificing their aspirations and standard of living. The money will be disbursed according to the claim payout option you had selected while purchasing the policy. You should keep in mind that term insurance only offers coverage for potential risks, and hence, is called a pure-risk cover. So, if you survive until the end of the policy term, no benefits will be paid out.

What Happens To A Term Life Insurance After Divorce?

When you buy term insurance, your main objective is to provide financial protection for your family - i.e., your dependent spouse, kids, etc. in the unfortunate event of your passing away during the policy term. This is why most married couples assign their spouses as nominees on their term insurance policy. However, circumstances can change, like in the case of a divorce, where you may no longer wish for your ex-spouse to receive such benefits. In such situations, it is highly recommended that you should update your life insurance beneficiary after divorce. Failing to update the nominee means that your ex-spouse will continue to be the recipient of the benefits in case of your untimely demise. It is crucial to review and update the nominee information for this to not happen.

How Do You Update/Change Your Nominee?

Here’s how you can change or update nominee of your term insurance policy -

• First, get in touch with your insurance company either through their website or offline channels.
• They will provide you with a ‘Change of Nomination’ form that you need to duly fill out.
• Once you complete the form, you need to submit it to your insurer along with any required documents.
• It is also important to ensure that you receive an acknowledgement from your insurer confirming the same, to avoid any complications when your nominee makes a claim in the future.

What Happens If You’ve Purchased Term Insurance Under The MWP Act?

The Married Women's Property Act (MWP Act) is a crucial legislation that safeguards the rights of married women and ensures they receive the benefits from their spouse's term insurance policy before anyone else. For this, you need to purchase your policy and sign an extra addendum along with your proposal form. By buying a policy under the MWP Act, the sum assured can only be claimed by your wife and children. It's important to note that no other individual, institution, or family member can make a claim on the proceeds to settle any debts. You should be aware that the MWP addendum can only be signed when purchasing the term insurance policy. Once signed, it cannot be modified or revoked by anyone, including you. Therefore, as per life insurance beneficiary rules after divorce, if a married man purchases a term insurance policy under the MWP Act and designates his wife as the nominee, she will be entitled to the benefits even if a divorce takes place.

To Conclude,

What happens to life insurance after divorce is an important aspect of financial planning that people should know, especially if you have assigned your spouse as the nominee. To ensure that the intended recipient receives the benefits, it is advisable to change the life insurance beneficiary after divorce. You can contact your insurance company regarding the same and submit the necessary documents to update your nominee in the policy. By doing so, you can ensure that the policy proceeds go to the right person in case of an unfortunate event.