The issues surrounding benefits to ex-spouses can be dizzying
It is not uncommon for young couples to engage in a flurry of financial planning activities shortly after marriage. As part of that process, many couples obtain expensive life insurance policies, hoping that if one of them dies before the other, the surviving spouse will not have to struggle too hard financially. For many, the very act of obtaining these policies is an expression of love.
Once those policies are obtained, however, many couples tend to forget about them. Premium payments may be set up to withdraw from a bank account automatically. In other instances, premiums are paid by the employer of one or both of the spouses, which makes ongoing coverage an even more forgetful circumstance.
There’s only one time when life insurance policies tend to be front and center in people’s minds – and that is when someone dies. The surviving spouse is left to make a claim and they must do so at a time when they are already overcome with grief.
But what happens when the first spousal death occurs after the couple has divorced? What if the surviving ex-spouse is still named as the sole beneficiary of the policy? This scenario is not unusual at all. With life insurance policies relegated to an afterthought and with the United States’ divorce rate hovering between 40 to 50 percent, this situation actually arises all the time.
As this article will discuss, the outcome of these circumstances varies depending on policy language, divorce decrees, and the law of the state where the couple lived. With all of these variables at play, it’s easy to see why life insurance companies typically deny any claim by a surviving ex-spouse when that person makes a claim for receipt of a death benefit. And it is equally easy to understand why the best course of action for survivors is to retain an attorney who specializes in denial of life insurance claims.
What does the policy say?
In some instances, the life insurance policy itself may dictate what happens if: (1) a policy names a surviving spouse as the sole beneficiary; and (2) the couple is divorced without a new beneficiary being named at the time of death.
We can tell you unequivocally that these types of policy provisions are rare. Why? Because the insurance company actually profits from delays in paying out claims. The longer they can hold onto premium payments without paying death benefits, the more money they can reap from investing those premiums into the stock and bond markets. In other words, your policy is unlikely to resolve this issue for you.
Even if the policy does contain specific instructions, however, a death penalty claim in this situation will rarely get resolved quickly. This is because multiple people may make a claim for death benefits, arguing that the deceased would have never intended for the policy beneficiary (i.e., the ex-spouse) to profit at the time of death. These arguments frequently come from children, family members of the deceased, and even new partners of the deceased.
What does the divorce decree say?
If couples hire competent divorce lawyers, those lawyers are going to discuss every single asset (and potential asset) the couple shares during the divorce proceedings. Life insurance policies are no exception. Frequently, for example, if a divorce involves children, the spouse who retains majority custody of the children will insist that he or she remain the primary beneficiary on the ex-spouse’s life insurance policy.
Whether the divorce ends in a settlement agreement or a decree entered by the court, these agreements to continue coverage do become legally binding. Nonetheless, we see ex-spouses try to make post-divorce beneficiary changes all the time. Ultimately, all that does is set the ex-spouse and the new beneficiary up for a prolonged legal battle when the policyholder dies.
To complicate matters, the divorce agreement and the policy language regarding divorce may be in direct conflict. What happens in those situations? The variables are endless but we can tell you without hesitation that if you are a surviving beneficiary facing this situation, you need to contact a lawyer specializing in life insurance claim denials immediately.
What does state law say?
To complicate matters even more, the laws of individual states may weigh into the analysis of who becomes the true beneficiary when a divorced person dies. In Florida, for example, state laws mandate that if a person dies with their ex-spouse still named as the life insurance beneficiary, the ex-spouse is legally deemed to have pre-deceased the person who actually just died. Confused yet?
In states with these sorts of laws on the books, the benefit would go to the named contingent beneficiary. The only problem there is that many policies don’t name contingent beneficiaries.
Even if a contingent is named, how does this state law interact with the divorce decree and the policy language, both of which may conflict with that law? As you can see, life insurance claims involving divorce are some of the most difficult claims to submit, process, and contest.
Hire a top life insurance lawyer from our firm
As we have discussed in many other articles, life insurance companies have a huge incentive to delay or deny claims. Moreover, they have plenty of lawyers whose job is to tie up confusing claims like these indefinitely.
Life insurance claims that involve divorce, children, new spouses, old divorce decrees, new beneficiaries, and the like are some of the most complicated claims ever. Life insurance companies and their lawyers are more than happy to deny these claims outright, or to stall decisions while the various parties claiming entitlement to benefits fight amongst themselves.There may be no more important time for you to retain an attorney who specializes in life insurance claim denials. We know the laws that impact insurance policies, divorce decrees, and subsequent beneficiaries. We advocate for our clients every day on these issues. This is one area of life insurance law that is undeniably too difficult to navigate alone. Call us today. We’re here to help. We have lawyers handling all 50 states.