Divorce can affect who receives life insurance proceeds, but it does not automatically change every policy or beneficiary designation. Pennsylvania law may revoke certain designations in favor of a former spouse. The outcome depends on who owns the policy, whether the designation is revocable, and whether an agreement, court order, or federal law affects the coverage.
Life Insurance After Divorce: Does a Beneficiary Change Automatically?
Not in every situation. Under 20 Pa.C.S. § 6111.2, a beneficiary designation in favor of a spouse or former spouse generally becomes ineffective if the person who made it was domiciled in Pennsylvania, is divorced when they die, and the designation was still revocable at the time of death. The law may also apply if that person dies during divorce proceedings, before a decree is entered, after the required grounds for divorce have been established.
When the statute applies, the former spouse is treated as though they died before the person who named them as beneficiary, unless an exception applies. The insurer's records may still list the former spouse even when the designation is legally ineffective.
The statute also generally protects insurers, plan trustees, and other parties responsible for payment from liability if they pay a spouse or former spouse under an existing designation, unless a court order prevents payment. The recipient may still be answerable to anyone harmed by the payment.
Pennsylvania law also requires the order accompanying a divorce decree to notify the parties that they may need to reaffirm or change beneficiary designations on existing life insurance policies, annuities, pensions, and other covered arrangements if they intend to keep or change the other party's beneficiary status. Failing to act may result in revocation under § 6111.2. See 23 Pa.C.S. § 3323(b.1).
Who Owns the Policy & Who Receives the Benefit?
The policy owner, insured person, and beneficiary may be three different people:
- Policy owner. Generally controls the policy, subject to its terms, court orders, and restrictions such as an irrevocable beneficiary designation.
- Insured person. The person whose life is covered.
- Beneficiary. The person or entity named to receive the proceeds if the insured dies while the policy is in force.
For example, one spouse may own a policy covering the other spouse's life. During divorce, the parties may need to address whether ownership should transfer, whether coverage should continue, and who should receive the proceeds. Changing the owner does not necessarily change the beneficiary, so both records should be reviewed.
When Can a Former Spouse Still Receive Life Insurance Proceeds?
A former spouse may still receive life insurance proceeds if an exception under § 6111.2 applies.
The statute recognizes four ways to show that the beneficiary designation was intended to survive the divorce: the wording of the designation, a court order, a written contract between the parties, or a new designation naming the former spouse after the divorce decree is issued.
The fourth exception is particularly important. If someone names a former spouse as a beneficiary again after the divorce decree, that new designation shows an intention to keep the former spouse as the beneficiary.
How Can a Divorce Court Address Life Insurance?
Life insurance may be part of the financial arrangements addressed during a Pennsylvania divorce. Under 23 Pa.C.S. § 3502(d), a court may direct the continued maintenance and beneficiary designations of certain existing policies insuring either spouse. These policies must have been purchased during the marriage and be owned or effectively controlled by either spouse.
When necessary to protect a party's interests, the court may also direct the purchase of a policy and specify its beneficiary designations.
This does not mean every divorcing spouse must maintain life insurance for the other. Whether coverage should continue, who pays the premiums, and who receives the proceeds depend on the circumstances and any applicable agreement or court order.
What Should a Marital Settlement Agreement Say About Life Insurance?
If life insurance is part of the parties' financial arrangements, a marital settlement agreement can spell out each person's responsibilities. The terms should reflect the parties' intentions and account for any financial obligation the coverage is meant to protect.
For example, if a policy is intended to secure a support obligation, the agreement can identify the required coverage amount, beneficiary, and period during which the policy must remain in force.
Other terms to consider include:
- Policy ownership. Identify who owns the policy and who is insured.
- Beneficiary designation. State whether a former spouse, child, trust, or another person should receive the proceeds.
- Premium payments. Specify who is responsible for premiums and how payment will be handled.
- Duration of coverage. Describe how long the policy must remain in force, if continued coverage is part of the agreement.
- Proof of coverage. Address whether the policyholder must provide current policy information or confirmation of coverage.
- Changes to the policy. Explain whether the policyholder may change the beneficiary, reduce coverage, borrow against the policy, or cancel it.
The agreement should also account for the type of policy and any restrictions imposed by the insurer or benefit plan.
For more on the role of written terms in an uncontested divorce, see How to Draft Effective Settlement Agreements.
What If the Life Insurance Comes Through an Employer?
Some employer-provided group life insurance is part of an employee benefit plan governed by the Employee Retirement Income Security Act (ERISA). In Egelhoff v. Egelhoff, 532 U.S. 141 (2001), the U.S. Supreme Court held that ERISA preempted a Washington law that automatically revoked a former spouse's beneficiary designation under an ERISA-governed employee benefit plan. The case interpreted Washington law, not Pennsylvania's statute, but it illustrates how federal law can affect beneficiary designations in ERISA-covered plans.
Not every employer-provided policy is necessarily governed by ERISA. If your coverage comes through work, review the plan documents and ask the plan administrator whether ERISA applies and how to change the beneficiary. For an ERISA-covered plan, federal law may preempt Pennsylvania's automatic revocation rule, and the plan's governing documents generally determine who receives the proceeds.
Health insurance raises a separate post-divorce issue: whether a former spouse can remain covered under an ex-spouse's plan.
What Should You Review Before Your Divorce Is Final?
Gather the policy information for any life insurance that may be affected by the divorce.
It can help to review the following details with your attorney:
- Current policy information. Identify the policy owner, insured person, coverage amount, and current beneficiary.
- Policy type. Determine whether the coverage is individually owned or provided through an employer or another benefit plan.
- Court orders and agreements. Check whether existing documents address continued coverage or beneficiary rights.
- Change procedures. Ask the insurer or plan administrator which forms and approvals are required and when changes take effect.
- Related financial obligations. Determine whether the coverage supports an obligation addressed in the divorce, such as support payments.
Keep copies of submitted forms, confirmations, policy documents, and relevant court orders with your divorce records. Written confirmation from the insurer or plan administrator can help show when a requested change took effect.
Discuss Life Insurance Terms During Your Pennsylvania Divorce
Life insurance can be one part of the financial details that spouses address when preparing an uncontested divorce. Cairns Law Offices provides online assistance with Pennsylvania no-fault, uncontested divorces, including help with marital settlement agreements and ongoing attorney communication.
If you have questions about how an agreement may address an existing policy or beneficiary designation, discuss the circumstances before finalizing your divorce documents. Call (888) 863-9115 or contact us online.
