Can an Ex-Spouse Collect Life Insurance Benefits?

Generally, life insurance benefits are paid to the named beneficiary, regardless of his or her status as a spouse. In places other than Michigan, divorce usually has no effect on this designation of beneficiary.

When you purchase a life insurance policy, you are asked to name a beneficiary. This is the person who will receive the policy’s payment upon your death. Many people name their spouse as their life insurance beneficiary and subsequently fail to update their policy if the marriage ends in divorce. A divorce does not automatically remove the spouse as the beneficiary – you must change the beneficiary of your policy according to your insurance company’s procedures if you do not want your ex-spouse to receive the policy’s benefits.

However, there are instances where an ex-spouse is not eligible to collect life insurance benefits even if he or she is the named beneficiary on the policy. For instance, the insurance policy may contain a provision that excludes a beneficiary whose spousal status does not exist at the time of the insured’s death from collecting benefits. The divorce decree may also explicitly state that the ex-spouse is no longer eligible to receive life insurance benefits. In addition, some states have laws that revoke a person’s beneficiary rights upon divorce (Michigan is one such state).

Case Studies: Life Insurance Benefits and Ex-Spouses

Case Study 1: Outdated Beneficiary Designation

John and Jane were married, and during their marriage, John named Jane as the beneficiary of his life insurance policy. After their divorce, neither of them updated the beneficiary designation on the policy. Unfortunately, when John passed away, Jane still received the life insurance benefits because the policy had not been updated to remove her as the beneficiary.

Case Study 2: Exclusionary Provision in the Policy

Sarah and Michael divorced, and during their marriage, Sarah named Michael as the beneficiary of her life insurance policy. However, the policy contained an exclusionary provision that stated if the named beneficiary’s spousal status ceased to exist at the time of the insured’s death, the beneficiary would be ineligible to collect the benefits. When Sarah passed away, Michael was unable to collect the life insurance benefits due to this provision.

Case Study 3: Revocation of Beneficiary Rights by State Law

Rachel and James divorced in the state of Michigan. In Michigan, state law automatically revokes an ex-spouse’s beneficiary rights upon divorce, unless the divorce decree explicitly states otherwise. Rachel had named James as the beneficiary of her life insurance policy during their marriage, but after their divorce, James lost his rights to the life insurance benefits.