What Happens to Life Insurance Policies on Divorce? Guidance for England and Wales

Introduction

Life insurance can play a key role in financial arrangements after divorce in England and Wales. Policies can provide security for mortgage payments maintenance obligations and children’s future needs. The treatment of life insurance depends on policy type who owns it and the terms of any financial order or agreement.

Types of life insurance and common purposes

Term assurance provides cover for a fixed period and often secures a mortgage. Whole of life and whole‑of‑life style policies provide lifelong cover and may form part of the capital available on death. Some policies name a specific beneficiary while others pay into the estate. Many couples hold policies to guarantee maintenance or to protect dependants financially.

Who owns the policy matters

The owner controls the policy and receives proceeds unless the policy names a beneficiary or is held in trust. If one party owns the policy the court will treat it as an asset for financial disclosure. Where both parties are owners the policy clearly forms part of the matrimonial pot. Parties must disclose all policies and provide copies of policy documents when negotiating a settlement or applying to court.

Beneficiaries and nominations

A policy beneficiary nomination can override intestacy rules and direct proceeds to a named person. If the parties agreed that a policy should benefit the children a nomination to trustees or to the children can continue after divorce. Where a former spouse remains the nominated beneficiary the parties should review whether that remains appropriate as part of the financial settlement.

Using life policies to secure maintenance

Courts commonly require life insurance to secure maintenance for a spouse or children, particularly where one party depends on future income. The court can make an order that a party must take out or maintain life cover and list parameters such as minimum cover amount period and beneficiary. The order aims to ensure maintenance continues if the payer dies.

Trusts and protecting beneficiaries

Holding a policy within a trust prevents proceeds forming part of the estate and provides control over distribution. Where parties intend policy proceeds to serve children’s needs they often place the policy in trust for the benefit of the children. Trustees then manage the payout in line with the trust terms and the court will give weight to trust arrangements when approving a settlement.

Changing or transferring policies

Parties can agree that one will keep a policy and compensate the other by way of capital or income. The court can order the transfer of a policy but insurers often require the owner’s consent and may assess health or replace the policy. Parties should check policy terms and obtain insurer confirmation before relying on a transfer.

Tax and practical considerations

Life insurance proceeds are usually paid tax free but trust arrangements and beneficiary choices can have wider estate planning implications. Insurers may apply rules on assignment or change of ownership. Parties should obtain independent financial advice and inform insurers promptly of any changes agreed in a settlement.

Consent orders and enforcement

When parties reach agreement they can record obligations about life insurance in a consent order. The court will approve orders that it sees as appropriate and enforceable. If a party fails to comply the other can apply to the court for enforcement measures.

Practical steps on divorce

Both parties should list and disclose all policies including policy numbers insurers and cover levels. They should consider whether cover should continue who should be the beneficiary and whether to place a policy in trust. Legal and financial advice helps create robust arrangements that protect children and manage future risk.

Key points

– Life policies may secure mortgages maintenance or children’s needs

– Ownership and beneficiaries determine who controls proceeds

– Courts can order life cover to secure maintenance obligations

– Trusts help protect payouts for children

– Obtain insurer confirmation legal advice and record agreements in a consent order

At Alexander JLO we have many years of experience of dealing with all aspects of family law and will be happy to discuss your case in a free no obligation consultation. Why not call us on +44 (0)20 7537 7000, email us at info@london-law.co.uk or get in touch via the contact us button and see what we can do for you?

This blog was prepared by Peter Johnson on 1st December 2025 and is correct at the time of going to press. With over forty years of experience in almost all areas of law Peter is happy to assist with any legal issue that you have. He is widely regarded as one of London’s leading divorce lawyers. His profile on the independent Review Solicitor website can be found Here.

To follow up on any of the above please contact Guy Wilton of our family department. Guy has wide experience of acting for the firm’s clients, their family and their businesses. Guy’s experience as a lawyer started in the Northern and Welsh Circuits, including the Liverpool Courts, where he represented numerous clients after being called to the Bar, before opting to join Alexander JLO in 2017 and qualifying as a solicitor in 2024. He is a highly experienced family lawyer with a particular interest in financial remedy proceedings and child contact disputes.

Guy’s profile on the independent Review Solicitor website can be viewed here.