Divorce, separation, and why your life insurance needs a makeover
Breakups are tough enough without thinking about your insurance. But if you’re going through a divorce or separation, reviewing your life insurance and other policies isn’t just a good idea—it’s essential. Changes to your personal life mean your financial protection needs to keep up.
“Family break-ups, separation and divorce can be highly stressful.”
-Healthdirect, Coping with family break-up, separation, or divorce
Separating your finances after a split
When you separate from a partner, it’s not just the house or car that gets divided—your insurance policies are part of the mix too. In Australia, nearly 48,700 divorces were granted in 2023, and with that comes the need to update your financial situation.
First things first, you need to know how your policy is set up. There are different ways life insurance can be owned, and this affects who controls it. Let’s break it down:
Individual ownership: If you’re the sole owner of the policy, you can change it as you like. But if your partner was named as a beneficiary, it might be time for an update.
Joint ownership: Things are trickier here. If you and your partner share the policy, both of you will need to agree on any changes.
Superannuation-linked life Insurance: If your life insurance is tied to your super, things can get a bit trickier after a divorce. Since your insurance is linked to your superannuation account, it might be affected by family law splitting orders. Sorting this out isn’t always straightforward, so it’s a smart move to chat with a financial adviser to figure out the best way forward.
Source: TAL | Separation and Divorce
If you’re not sure how your policy is structured, or need guidance on what to do next, it’s always a good idea to chat with a financial adviser.
Update your beneficiaries—who’s getting what?
One thing many people forget after a separation is updating their beneficiaries. If your ex-partner is listed, they may still receive a payout after your death, even if you’re no longer together. For couples with kids or shared financial responsibilities, this might make sense for a while. But if that’s not the case, you probably want to rethink it.
You’ve got options—your beneficiary doesn’t have to be your partner. Here’s who else you can name:
Your kids (as long as they’re over 18)
Parents
A sibling or friend
A trust to manage everything for you
You can switch things up depending on your circumstances. Remember, it’s not just about the present but the long-term impact on your loved ones.
“Leaving an ex-partner as your beneficiary may seem convenient, but updating your policy ensures your loved ones are protected based on your new circumstances.”
Source: Moneysmart Australia
Let’s talk about shared financial responsibilities
Divorces and separations often come with shared financial ties, like joint debts or co-owned businesses. If you’re paying off a mortgage or still have loans in both names, you’ll want to ensure that your insurance covers those commitments if something happens to you. In fact, over 60% of divorced Australians still share some financial responsibilities with their ex.
Consider setting up a policy that reflects your current situation. A life insurance payout could help cover debts like:
a shared mortgage
child support payments
co-owned business loans
When it comes to joint responsibilities, keeping your insurance updated ensures that your family doesn’t inherit unwanted debts in the future.
“Around 20% of Australians who go through a divorce report high levels of financial stress related to joint debts and loans.”
Making the split easier—get advice
Navigating a divorce can feel overwhelming, and reviewing your insurance policies is probably the last thing on your mind. But think of it this way—getting your finances sorted is like hitting the reset button on your future. You’re taking control of your next chapter, and that’s powerful.
Don’t know where to start? A financial adviser can help you figure out the right moves. Whether it’s changing your beneficiaries or splitting up your policies, making informed decisions now can save you (and your loved ones) a lot of stress later.
Resources for more information
Family Relationships Online is an Australian Government website containing about a range of services to assist families in managing relationship issues.
Family and Relationships – Getting a divorce is the NSW State Government webpage containing a range of information about financial, legal and support services.
Relationships Australia is the leading provider of relationship support services for individuals, families and communities.
Divorce Care offers divorce recovery support groups across Australia.
Healthdirect is the Australian Government’s health website offering free advice on health matters, including the effects of divorce and separation.
Moneysmart offers advice on the steps to take around finances when you separate or divorce.
Lifeline provides 24-hour support for emotional distress or crisis. Call 13 11 14.