Does Life Insurance Get Divided in a Maryland Divorce?

 Posted on May 14, 2026 in Divorce

Life insurance isn't always the first thing people think about when dividing assets in a divorce. Still, it can have significant financial value. Whether a policy gets divided, transferred, or left alone depends on the type of policy you have. If you're heading into a divorce in 2026 and aren’t sure how your life insurance will be handled, our Laurel, MD divorce attorney can help.

Does Maryland Treat Life Insurance as Marital Property?

Maryland Code, Family Law Article §8-201 outlines how courts distinguish between marital and nonmarital property. Life insurance can be either, depending on its structure.

Term life insurance has no cash value. It pays a death benefit if the insured person dies during the coverage period. There's nothing to divide while both spouses are alive. Term policies typically aren't considered marital property, though the beneficiary designation is a separate legal issue that’s worth addressing.

Permanent life insurance is different. It can include whole life, universal life, and variable life policies. These policies build cash value over time. That cash value is an asset. If the policy was purchased during the marriage using marital funds, the cash value that accumulated during the marriage is generally considered marital property and can be divided in a divorce.

If a policy was started before the marriage, courts look at how much cash value existed at the time of the wedding versus how much grew during the marriage. The portion that grew during the marriage may be subject to division. The pre-marital portion may not be.

What Happens to the Beneficiary Designation on Life Insurance When You Divorce in MD?

Finalizing a divorce doesn't automatically remove your ex-spouse as the beneficiary on your life insurance policy. You have to update that designation yourself, directly with the insurance company, after the divorce is complete.

In Maryland, some financial accounts and retirement assets are governed by laws that dictate what happens to beneficiary designations after divorce. Life insurance policies, however, are generally controlled by contract law. This means the insurance company will often pay whoever is named, regardless of your divorce decree.

There are a few situations where your divorce agreement may require you to keep your spouse as a beneficiary, at least temporarily. If you're ordered to pay alimony, a court may require you to maintain a life insurance policy naming your ex-spouse as beneficiary to secure those payments in the event of your death.

If you share children, a court may require a policy to protect child support obligations. If it's negotiated as part of the overall settlement, maintaining coverage for a period of time may be part of what you agreed to.

Outside of those situations, updating your beneficiary designation promptly after divorce is something every divorcing person should put on their to-do list.

What Methods Do Maryland Courts Use To Divide Life Insurance Policies?

When a permanent policy's cash value is subject to division, there are a few ways to handle it. Common approaches include:

• One spouse keeps the policy and buys out the other's share of the cash value as part of the overall property settlement.

• The policy is surrendered, the cash value is paid out, and the proceeds are divided between the spouses.

• The policy is transferred to one spouse, who takes over premium payments and ownership going forward.

Which approach makes the most sense depends on the policy's terms, its current cash value, and how it fits into the broader picture of property division. Taxes can also be a factor. Surrendering a policy may trigger tax consequences, so speaking to an attorney before deciding which to use is wise.

Call a Columbia, MD Divorce Attorney Today

Life insurance is just one of the details that can be overlooked in a divorce without the right guidance. Our Laurel, MD asset division lawyer brings over 20 years of experience to every case and takes a personal, client-centered approach. You won't be handed off to a paralegal or left wondering what's happening with your case. Get the professional legal help you need by contacting DM Family Law at 443-545-8100 today.