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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.

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