Prices Increasing Soon
In India, just like marriages, life insurance policies are also considered valuable decisions. Therefore, life insurance plans may be subject to division or alteration in the event of a divorce. Understanding the impact of divorce on life insurance plans is essential for individuals going through this process, as it can have a direct effect on the financial security and well-being of the dependents.
#All savings and online discounts are provided by insurers as per IRDAI approved insurance plans | Standard Terms and Conditions Apply
By clicking on "View plans" you agree to our Privacy Policy and Terms of use
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ
In this article, we will understand what happens to life insurance plans in India when there is a divorce and what steps should be taken to deal with the situation.
A divorce is a life changing event and with it comes an array of alterations in the life insurance plans attested to both the partners. The extent of the impact depends on various factors such as the specific terms of the policy, the ownership of the policy, and any legal agreements or court orders related to the divorce. Here are a few key points to consider for the life insurance plan during a divorce:
Nominee/Beneficiary Updation: If the ex-spouse is named as the nominee/beneficiary, the divorce may prompt the policyholder to update the beneficiary information. It is important to review and update the nominee to ensure that the death benefit goes to the intended recipient after the divorce.
Ownership and Premium Payments: The ownership of the life insurance policy may be affected by a divorce. If the policy is jointly owned by both spouses, they may need to decide on how to divide or transfer ownership of the policy. Additionally, if the premium payments were previously shared or made by the ex-spouse, new payment arrangements need to be established to ensure the policy remains active.
Sum Assured/Policy Amount and Premiums: After a divorce, the life assured’s financial situation may change, and therefore, reassessing the sum assured and premiums of the life insurance policy may be necessary. The need for coverage may increase or decrease depending on factors such as financial responsibilities, income changes, or new dependents.
Legal and Professional Advice: Due to the complex nature of divorce and its impact on life insurance, it is advisable to consult with legal and financial professionals. An attorney experienced in marriage/divorce law can provide guidance on the legal aspects of changing beneficiaries or ownership. Moreover, a financial advisor or insurance professional can help assess the appropriate coverage and policy adjustments.
Spouse as an ‘Assignee’: An appointee must be selected in case the nominee is a minor. The appointee will act as a caretaker in case of the death of the policyholder or if the plan matures. More complications can arise in case one partner names the other an ‘assignee.’ You must ensure that your spouse reassigns you the plan before the divorce.
Policies such as joint life plans, which are not particularly popular in India, may have to be allowed to lapse as insurers don’t split such plans.
Plans with an investment component, including endowment policies and ULIP Plans are settled according to the contribution of each partner.
Health insurance companies provide the choice of removing the name of a beneficiary during the plan term, which means that the principal proposer is enabled to remove the name of the spouse.
*Note: Assignment means the transfer of both rights and liabilities of the insurance plan to the assignee.
Term Plans
The Married Women's Property Act 1874 (MWPA) plays a crucial role in protecting the interests of married women regarding life insurance policies. It empowers them and safeguards their rights in terms of life insurance policies, especially in the event of a divorce. Here are some key reasons why the MWPA is important in the context of life insurance after divorce:
Preservation of Policy Benefits: The MWPA allows a married woman to protect the benefits of a life insurance policy from being controlled or claimed by her former spouse or creditors. It establishes a separate right for the woman, ensuring that the policy's claim amount remains secure and accessible to her, even if she is divorced.
Nominee/Beneficiary Protection: Under the MWPA, a married woman can be designated as the irrevocable beneficiary of a life insurance policy. This means that the life assured (her ex-spouse) will not be able to remove her as the nominee/beneficiary. The MWPA safeguards the woman's right to receive the policy benefits, as intended, providing financial security and independence.
Financial Provision for Children: In cases where children are involved, the MWPA enables a divorced woman to secure life insurance coverage for her children’s financial security. She can ensure that the claim amount will be used to support and provide for the children's well-being, even in the event of the life assured’s death.
Protection from Creditors: The MWPA protects the death claim amount from being claimed by the life assured’s creditors. This is particularly important after a divorce when the policyholder may have financial obligations or debts. By establishing the policy as the separate property of the married woman, it cannot be seized by creditors seeking to satisfy the policyholder’s debts, offering her a level of financial security.
Secure Your Family Future Today
₹1 CRORE
Term Plan Starting @
Get an online discount of upto 10%#
Compare 40+ plans from 15 Insurers
Below mentioned are the ways how you can deal with a life insurance plan post divorce:
Notify the Insurance Company: Once you have made decisions regarding nominees/beneficiaries, coverage amounts, and ownership, contact the insurance company to inform them about the changes. They will guide you through the necessary paperwork and documentation required to update the policy accordingly.
Policy Division: Life insurance policies are usually considered individual assets and can therefore, be divided between the partners during the divorce. If a husband has assigned a policy to his wife but is still paying the premiums, he can request to regain ownership of the policy. For policies with cash value, the couple should consult their legal advisors and the insurance company to determine the appropriate course of action.
Re-evaluate the Sum Assured/Policy Amount: Evaluate whether the current coverage amount is still appropriate after the divorce. Consider factors such as changes in financial responsibilities, income, and dependents. Adjust the coverage amount if necessary to ensure it adequately meets your needs and financial obligations.
Maintain Premium Payments: Ensure that premium payments are made without fail to keep the policy active. Failure to pay premiums could result in lapsation of the policy, thereby, leading to loss of coverage.
After a divorce, certain changes may need to be made to a life insurance plan, like updating beneficiaries, transferring policy ownership, or adjusting coverage amounts. Hence, it is important to review the policy and consult with professionals to make sure that it aligns with the new circumstances. By taking these steps, both the partners can ensure that their life insurance plan continues to provide the intended financial protection for themselves and their loved ones after divorce.
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
Life insurance fraud is a financial crime that can be committed
Read more
High net worth individuals often opt for life insurance plans to
Read more
“Policy Bazaar insurance clarified the term policy for me, so
Read more
“I recently bought an HDFC term plan and it is the best
Read more
The life insurance policy in India is a type of life insurance
Read moreInsurance
Calculators
Payment Methods
Secured With
Follow us on
