Life Insurance After Divorce

Life Insurance

By Sarah Knapp

Life insurance is designed to provide an added level of protection and security for your family and loved ones in the event of tragedy. Most people make the beneficiaries of such policies their spouse or their children.  But what happens to those life insurance policies after a divorce?

Life insurance policies are contracts between the insurer and the policy owner, and the policy owner generally has full authority to designate whomever he or she chooses as the beneficiaries of the policy. Further, the policy owner can often terminate the policy or change the beneficiaries at any time, and many do after a separation or divorce.

However, if the insured individual has a child or spousal support obligation, the divorcing parties may want to keep that financial security net in place. Domestic Relations Laws in Virginia allow the Court to require that such policies and beneficiary designations, be maintained in some circumstances.  Additionally, parties can agree to maintain certain life insurance obligations through Settlement Agreements.

Under Virginia law, the court has the authority to order a policyholder to maintain a life insurance policy and/or designate their minor children (not the former spouse) as beneficiaries as part of a child support order.

In 2017, a new law was passed that extends that authority to cases involving spousal support.  The new law, VA Code Section § 20-107.1:1, took effect on July 1, 2017, and allows the court to require the maintenance of life insurance policies (private or employer provided), as well as the beneficiaries, that were in existence during the marriage in cases where there is a spousal support award.

An important caveat, especially in Northern Virginia where there are many federal employees and members of the military, is that the state courts have a limited ability restrict beneficiary designations for life insurance policies provided pursuant to federal law. The Federal Employee Group Life Insurance (FEGLI) and Servicemen’s Group Life Insurance (SEGLI) programs are employer provided life insurance policies put into place as the result of laws enacted by Congress.  The law that govern SEGLI, give service members the right to designate their beneficiaries and change them at any time. The Courts have determined that because federal law trumps state laws pursuant to the U.S. Constitution, state courts cannot take away or restrict that right. For federal employees, a court order can restrict this right, but only if a copy of the order is filed with the appropriate government office prior to the employee’s death

The result is that that Virginia courts cannot not make any orders related to SEGLI policies, nor can they enforce an agreement to maintain these policies included in a Settlement Agreement and for FEGLI certain steps must be followed to enforce for such obligations.