Separation or Divorce: Life Insurance

Another situation that can arise is one in which the husband is obliged to provide $1 million of private (non-ERISA) life insurance to the ex-wife and dies having reduced the coverage to $700,000 and having taken out another policy for $300,000 covering his second wife. In most states, divorce, per se, does not affect a beneficiary designation in a life insurance policy. The second wife, then, may get to keep the $300,000. What should have been done? The divorce agreement should have contained a clause to the effect that such policies are “deemed to have been intended by the husband to secure the obligations set forth in the agreement regardless of the beneficiary designation” — and that such policy should be payable to the first wife to the extent of the obligation. While it is unclear whether such a provision would work in other states, the Supreme Judicial Court has made clear that it will in Foster v. Hurley, 444 Mass. 157 (2004).