Of special importance in divorce are issues relating to life and disability insurance. Because many life insurance policies may have accrued cash values, these values must be accounted for in the division of assets. However, obtaining such policies' cash surrender values will usually result in termination of the coverage under the policy as written or, at the least, in loan charges and an obligation to pay back the cash amount or to reduce coverage under the policy. This may not be an acceptable result, especially where continued coverage is required, and other financial arrangements may be required to account for these assets.

Insurance and the Divorce Settlement

Typically, continuation of existing life insurance and disability policies requires consideration in a divorce settlement. The details surrounding the purposes for which such coverage was initially obtained may alter with divorce, which may affect the divorcing partner's ability to keep the policies in force as initially written. Most importantly, divorce raises an issue whether one spouse maintains, after divorce, an insurable interest in the other spouse's life or ability to continue earning an income at levels established or expected at the time of divorce. Earlier law disallowing such coverage on the basis that an insurable interest had ceased to exist has generally given way to recognition of the continuing financial obligations that spouses may have to each other and their offspring following a divorce.

Also typically, any accident or mortality that would affect the ability of a supporting spouse to meet support obligations or other financial obligations, such as child support, tuition and other foreseeable expenses associated with major life events, should be anticipated in advance and taken into account in divorce settlement negotiations. To the extent possible, it may be advisable to carry insurance adequate to meet the expenses of such obligations in the event one or both responsible spouses should pass away, particularly during a foreseeable period when such obligations may exist.