Dear Insurance Adviser,
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I just got divorced, and the judge ordered both of us to split all annuities, insurance policies, bank accounts, etc.
My ex says there is no value in his $100,000 term life insurance naming me as the beneficiary, so he took my name off the policy. That doesn't sound right, but I am confused about how to split a life insurance policy when we are both living. Don't you have to pass away before anyone can collect? Should I believe my ex and just forget about this policy?
The judge ruled that you split all cash and cash equivalents. One form of the latter is cash value in a permanent life insurance policy. Since a term life insurance policy has no cash value in most cases, your ex is correct. If he dies while the policy is in force, the $100,000 death benefit will be paid to his current beneficiary. He apparently is the owner of the policy -- the person who pays the premium and who is the only person authorized to change beneficiaries.
If the original purpose of the $100,000 term life insurance policy still exists and involves helping you care for any children you have together and if you would have the children full time in the event of his death, he might be willing (with or without the court's help) to transfer the ownership of the policy and the payment of premiums to you. Then you can name yourself as the beneficiary. He could pay the premiums, of course, but it's better that you pay them. It's one less thing for the two of you to hassle over.
On the other hand, if the purpose of the life insurance originally was to do something such as pay off a mortgage or other debt, it's probable the need no longer exists.