Divorcees Often Neglect Life Insurance Updates, Research Shows
A recent study indicates that a sizable proportion of individuals undergoing divorce neglect to update their life insurance policies, a lapse that could have significant financial repercussions. The research, conducted by Legal & General (L&G), reveals that approximately 10% of divorcees have forgotten to remove their ex-partners as beneficiaries, posing a potential risk.
The study investigated the financial behaviors of individuals post-divorce, highlighting several critical areas where people may be exposed to risk. For example, around 7% of those surveyed discussed life insurance beneficiaries during their separation, while 27% had canceled a joint life insurance policy that was in place during the marriage. However, only 6% had explicitly waived their rights to a joint life insurance policy during the divorce process.
Additionally, the report showed that about 11% of divorcees have delayed or overlooked removing their former partners from their wills, creating the possibility that their ex-spouse could inherit their estate. L&G also noted that just 4% of people take out critical illness cover and 3% take out income protection after a divorce.
This issue touches on a wide range of financial planning needs. According to L&G, around 7% of divorcees mentioned they would consult a financial adviser as part of their divorce process, which could leave “many vulnerable to financial errors, which could have long-term consequences.”
James Shattock, managing director of UK Protection at L&G, emphasized the importance of financial awareness during divorce. “Divorce is always difficult but, without advice, it can be… costly too. It’s really important for anyone going through a separation to be fully aware of the financial implications of divorce and to ensure they review other important elements, like their wills and financial products like life insurance, to ensure beneficiary information is updated.”
Shattock further explained the role of financial advisors in this process. “Advisers can play a key role in supporting clients during a separation, helping them to put a plan in place for the costs associated with a divorce, any shared debts and, potentially, making sure a Clean Break Order is in place.”
The company also offers resources designed to help people through this process. “We’ve also produced a financial health check tool to help people consider the wider financial implications of a separation.”
