Divorce involves several messy tasks. Attempting to sort out your life insurance is something that is commonly overlooked.
When you are trying to divide assets and make sure your children are adjusting to the changes, trying to figure out what to do with your life insurance policies may slip your mind. While this is common, it’s something you should try to avoid.
Update your beneficiaries
Life insurance is designed to protect the people you love from financial hardship if you die and they no longer have your income to rely on. If you were married when you purchased your life insurance policy, you likely have your spouse listed as your main beneficiary. When you divorce, you probably want to remove them as a beneficiary.
Account for the policy’s cash value
Some life insurance policies, especially universal and whole life policies, will build cash value as time passes. Every month, when you pay toward your premium, part of that money goes into a fund that will grow thanks to interest. The balance in this fund is your policy’s cash value, and this is your money. You can cash out the policy at any time.
The cash value of your life insurance policy is part of your net worth and must be included in your list of marital assets to be divided. If you do not list this, it may cause issues during the divorce process.
Taking care of your life insurance in a divorce
When going through a divorce, be sure to take the proper steps to handle your life insurance policy. This is also necessary for your spouse’s policy. Be sure to get what you are entitled to and protect your future by handling life insurance policies during a California divorce.