Questions regarding insurance policies often come up in the context of a divorce. Married couples may have commingled auto insurance policies, health insurance plans, and/or life insurance policies with their spouse as beneficiary. Technically, there are no rules on maintaining certain policies that existed at the commencement of the divorce in the sense that there is no automatic punishment or sanction for dropping these policies at separation. On the other hand, the courts have the power to order certain policies be maintained through their general equity powers in the period between separation and divorce. Perhaps, the most prudent action is to maintain all policies until finalization of the divorce or other mutual agreement or seek the advice of an attorney first to avoid the potential of additional fees that may be incurred if you are ordered to reinstate any policy and/or be responsible for any liability incurred while the other party was uninsured. Additionally, as it relates to health insurance specifically, it is routinely ordered as part of a support action and unreimbursed medical expenses, which can be substantial if there is a lapse in insurance coverage, will also be shared.
Section 3502(d) of the Divorce Code provides that the court can order the continued maintenance and beneficiary designations of certain policies or even the purchase of new policies as part of equitable distribution. For example, life insurance policies may often be utilized as part of an equitable distribution award to ensure the receipt of ongoing support obligations such as alimony. If there is no agreement or Order on life insurance policies post-divorce, the insured should update their policies immediately to reflect their desired beneficiary. Pennsylvania estate law does provide that post-divorce the ex-spouse is no longer entitled to receive payment on the policy even if the beneficiary designation on the policy was never updated. However, this will only be the end result for a private policy. Policies sponsored by an employer are governed by federal law and under ERISA, the proceeds must be paid per the plan documents regardless of the termination of the marriage.