Divorce is a life-changing event that not only affects personal and emotional well-being but also has a significant impact on financial matters. One area where divorce can have unforeseen consequences is life insurance. While many assume that divorce automatically revokes any life insurance beneficiary designations for ex-spouses, this is not always the case. If you need a Vermont life insurance lawyer call now.
Understanding your rights and responsibilities regarding life insurance after a divorce is crucial, especially if you don’t want your ex-spouse to benefit from your death. In this blog, we’ll break down how divorce impacts life insurance, the exceptions to automatic revocation statutes, and the options available to both policyholders and ex-spouses.
Does Divorce Automatically Revocate a Life Insurance Policy?
The short answer is no, divorce does not automatically cancel a life insurance policy or revoke the beneficiary designation in all states. If your ex-spouse is listed as the beneficiary on your policy, they may still have the right to collect the death benefit unless certain actions are taken after the divorce.
There are seven exceptions to the automatic revocation statute that applies to life insurance policies. These exceptions vary from state to state, so it's essential to understand how divorce laws in your state address life insurance beneficiary rights.
Exceptions to the Automatic Revocation Statute
The Automatic Revocation Statute is a law in some states that automatically removes the ex-spouse as the beneficiary of a life insurance policy after a divorce. However, this statute doesn’t apply in all states, and even in states where it does, there are exceptions. Below are the states with automatic revocation statutes:
Alabama
Alaska
Arizona
Colorado
Florida
Hawaii
Idaho
Iowa
Massachusetts
Michigan
Minnesota
Montana
Nevada
New Jersey
New Mexico
New York
North Dakota
Ohio
Pennsylvania
South Carolina
South Dakota
Texas
Utah
Virginia
Washington
Wisconsin
In these states, the automatic revocation statute generally revokes an ex-spouse’s rights as a beneficiary upon divorce. However, it’s important to note that there are exceptions in some cases, which may allow your ex-spouse to still claim the death benefit.
Changes You’re Likely to Face After Divorce
When a couple divorces, there are many changes that must be made to adapt to the new circumstances. One of the changes you’ll likely face is modifying your life insurance policy. If your ex-spouse is named as the beneficiary, they could still be entitled to receive the death benefit after the divorce, even if you no longer wish for them to do so.
Here are a few options to consider if you don’t want your ex-spouse to benefit from your life insurance policy:
Change the Beneficiary: One of the most straightforward ways to ensure your ex-spouse no longer receives the death benefit is to update the beneficiary designation. You can name someone else, such as a child, family member, or friend.
Cancel the Policy and Get a New One: Another option is to cancel the current policy and get a new one. However, this comes with risks. You may have to undergo another health evaluation, and depending on your age or health condition, it could be more expensive.
Options Your Ex-Spouse Has as a Life Insurance Beneficiary
While you, as the policyholder, have rights to change the beneficiary, your ex-spouse still has rights under the life insurance policy, especially if they are listed as the beneficiary. Even after a divorce, your ex-spouse may still be able to file a claim for the death benefit.
If the policy is governed by an automatic revocation statute in your state, your ex-spouse may lose their rights, but this is not always the case.
Legal agreements in the divorce settlement or court orders may also impact whether the ex-spouse can still claim the death benefit.
If your ex-spouse tries to claim the death benefit after the divorce, they may appeal the denial if they believe they are still entitled to the policy proceeds. This is why it’s important to understand the legal implications of not updating your beneficiary designations.
Appealing Denied Life Insurance Claims After Divorce
If your life insurance company denies your claim after a divorce, you may still have options to appeal the decision. Life insurance companies are required to follow the terms of the policy and the state’s laws, but they sometimes make errors or fail to properly enforce the exclusions related to beneficiary designations.
Our life insurance attorneys specialize in handling denied claims and disputes involving ex-spouse beneficiaries. We have successfully helped clients challenge wrongful denials and fought to ensure that life insurance benefits go to the rightful beneficiaries.
We understand the complexity of automatic revocation statutes and can guide you through the process of appealing a denied claim. We will help you understand your rights, negotiate with insurers, and fight for a favorable resolution.
Call us today.