- Date : 29/09/2023
- Read: 3 mins
Get a crisp overview of things to remember while restructuring your term insurance plan after a divorce.
- After a divorce, the term insurance policyholder can change his nominee, use surrender benefits, or lapse policy.
- Term insurance plans allow nomination changes under regular purchase.
- If purchased under The Married Women's Property Act, the nominated wife will remain beneficiary even after divorce.
Term Insurance: Key Features
Term insurance is a life insurance policy that provides coverage for a certain period. Typically, this period spans from 10 to 30 years. While creating a term insurance plan, the insured person nominates an individual.
If the insured dies during the specified period, a death benefit will be paid to the nominee. However, there is no payout or redemption if the policy expires or if the insured person dies after the policy period.
Let's dive into the things to consider for term insurance plans post-divorce.
Also Read: on term plans simplified.
What changes can be made after a divorce?
A divorce is a strenuous process, both emotionally and financially. It throws many challenges, including decisions regarding asset separation and alimony. Hence, knowing how to protect your assets in divorce is essential.
Fortunately, actions for a term insurance plan after a divorce are straightforward.
Term Insurance Purchased Under Regular Means
In this case, the policyholder can change the nominations to parents, siblings, or children. The insurance company allows changes in the nominee details by submitting a new nomination form.
Term Insurance Purchased Under MWP Act
From a social and legal standpoint, women's rights have always been an issue compared to men's rights in divorce. The Married Women's Property Act (MWP Act) was enacted to safeguard women's financial safety. The act separates a woman's property from the claims of in-laws, relatives, or creditors.
If a married man purchases a plan under the MWP Act, a divorce will affect it. Once nominated, they will continue to be the beneficiary till the end of the policy; claims to benefits cannot be revoked.
Actions that the policyholder can take
- The nominee can be changed from the spouse to parents, children, or siblings.
- In the case of a joint term plan, typically, the children are the nominees. In this case, the policyholders may continue the policy to safeguard the children's needs.
- Surrender benefits, if any, can be availed to invest the payout in the children's future or as the couple sees fit.
- The policyholder can stop paying the premiums. This will lead to a lapse in policy without any payouts.
Also, Read types of life insurance.
Conclusion
A term insurance plan is a wise purchase to safeguard financial stability. Making changes to this life insurance plan after a divorce is straightforward. However, mindfully purchasing the correct policy to protect your loved ones could go a long way.
Click here for latest information regarding life insurance plans.
Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.
