Consumer Alert: Divorce and Life Insurance Benefits
Life insurance or annuity benefits will not go to a former
spouse following a divorce, unless this is specifically directed to
happen. An insurance policy or annuity must
be updated to specify benefits go to the former spouse, the divorce decree or
other court order must direct this to happen, or there must another written
contract between the policy or annuity holder and the former spouse, stating this
benefit was intended to survive the divorce.
Commissioner Miller issued this alert after the Consumer
Services Bureau reported receiving several complaints about this type of
situation. Spouses are typically the
beneficiaries on life insurance and annuities, but Pennsylvania law explicitly
ends this arrangement upon divorce, without specific written instructions that
the former spouse should still receive the benefits.
The Insurance Department has come across instances where
individuals have continued to make premium payments on life insurance policies
for their former spouses under an understood agreement, to provide benefits in
the event of the former spouse’s death, or to provide financial assistance for
children should the former spouse die. However,
if the policy was not revised to show the beneficiary is now the divorced spouse,
and no longer the husband or wife, the payments will not go to that person.
Also, anyone who may be entitled to the benefits, such as a
subsequent spouse or children, could contest any payments that would be made to
the former spouse.
Commissioner Miller recommends anyone involved in divorce
proceedings discuss any life insurance policies or annuities with the divorce
attorneys to make sure the benefits go where the policy holder intends. She also recommends naming a contingent
beneficiary, should the primary beneficiary not be eligible or have passed away
prior to the payment of benefits.
View more Consumer Alerts.