The dissolution of the bond between two people who are married can be financially and emotionally difficult. Before the divorce is finalised, it is important to resolve any concerns arising from insurance policies, just as it is necessary for any other significant life or wealth change.
Joint policy: Joint life insurance plans are more popular among married couples since they reduce costs compared to buying two individual policies and simplify policy management. “In India, policyholders can include or exclude their spouse from their coverage. Again, the insurance company needs to know what the divorcing couple decides so that it may either reorganise the policy to cover only one or drop one entirely,” said Rakesh Goyal, Director, Probus Insurance Broker.
The Married Women’s Property Act (MWPA), 1874, was passed into law to protect married women’s property rights. The legislation was enacted to rectify historical injustices and give married women more autonomy over their property and assets, free from the influence of their husbands. “Under these plans, the husband can get an insurance policy and name the wife the beneficiary. However, the policy allows for the woman to continue to get benefits from it even after the couple has divorced.”
Goyal said, “As there are simply death benefits included in a term policy, not much will change here as the term plan may continue to function normally. However, given that the nominee is the spouse, they should rethink their nomination. However, the divorce will not affect the plan if the husband has included his wife as the beneficiary in the term plan under the MWPT Act.”
Also read: Does your term insurance cover coma and its aftermath? Also read: Want to buy a life insurance policy? You must first know the types of term plans on offerAlso read: Are you a diabetic and looking for term insurance plan? Check features, premium and other details here
Traditional policy: The most common policies in India are money-back plans and whole-life insurance policies. A money return policy is a form of life insurance policy that pays the policyholder on a regular basis during the policy's term. As the name implies, a whole life insurance policy covers the policyholder for the rest of their life. "Under such plans, one can forego the death benefits and accept the policy's cash value. If the nominee is the spouse, it is preferable to withdraw cash and divide the proceeds rather than continuing the policy," said Goyal.
What should you do?
Many of us have designated our spouses as beneficiaries of our life insurance policies. “At the time of divorce, one must revise their nomination to include either their parents’ or children’s names. If the former spouse is still listed as the policy’s nominee after the divorce, they will be entitled to the policy’s benefits in the case of the policyholder’s death. In order to ensure that the policy’s ultimate value is transferred to the intended beneficiary in the case of death, it is crucial to check and keep the nominee up to date,” said Goyal.