With the divorce rate at its highest across the nation, more and more people want to know their legal rights following this life-changing event. When a couple decides to divorce, they usually consult with a divorce attorney who walks them through the separation process and the process of distributing marital assets. If there are children involved, a divorce attorney will work on child support agreements. Rarely, however, do divorce lawyers advise their clients about the consequences the divorce has on their life insurance.
Divorce is usually governed by the family laws of the state in which the divorcing parties reside. If life insurance is an asset that comes into play during divorce, the state court where the case is heard may issue an order obligating one divorcing party to carry his/her life insurance for the benefit of the children or the other party. It may also restrict a divorcing party from changing beneficiaries on the life insurance policy. This is very common and many people like to know that there is some degree of financial security in case of a former spouse’s untimely death.
If an individual violates a divorce decree or a child support court order and, for example, changes beneficiaries after divorce, the aggrieved party may have a state law claim for the life insurance benefits after the insured’s death. This is true only when the life insurance policy at issue is controlled by state laws. When a life insurance policy is controlled by federal laws, such federal laws will trump any conflicting state laws, including a divorce decree or a contract.
SGLI, or Servicemembers’ Group Life Insurance, is life insurance that covers eligible servicemembers. It is a federal government program controlled by federal laws. These laws take precedence over any conflicting state law or regulation. The law regulating SGLI claims requires the insurance company to pay the benefits only to the beneficiary designated on the Beneficiary Election form. A claim from any other individual is denied. As a result, divorced individuals with court orders or state law claims may be unable to collect SGLI benefits if they are not beneficiaries on the SGLI policy.
For example, John was a servicemember with $400,000 in SGLI coverage. He and his wife Mary had 2 minor children. In 2010, John and Mary divorced. As part of their divorce, the court obligated John to maintain his life insurance coverage for the benefit of his two children and make Mary the sole primary beneficiary on the policy. Initially, John complied with the order, but changed beneficiaries in 2012 and made his sister the sole primary beneficiary on his SGLI policy. John died in 2013. Will Mary automatically receive the $400,000 in SGLI benefits? Not necessarily. Even though Mary has a state law claim, she may not receive the SGLI benefits after John’s death, because she was not the beneficiary on the SGLI policy. This is so because the laws controlling SGLI claims say that only the beneficiary can collect SGLI proceeds and these laws will take precedence over Mary’s state court order.
Life insurance laws are complex and require legal expertise of an experienced SGLI attorney. Divorcing individuals should understand their legal rights if an SGLI policy is involved. If your SGLI claim is delayed or denied, call our SGLI lawyer for a free confidential consultation.
Call (888) 510-2212 for a free SGLI consultation.