It is common scenario for Louisiana couples: One spouse takes out a term life insurance policy that names the other as beneficiary. But what happens to that policy in the event of a divorce? How can a life insurance policy that does not pay until someone dies be divided between the former spouses?
During divorce, all community property is subject to property division. Community property consists of the assets and debts that were acquired by either party during marriage, including things like real estate, retirement accounts, bank accounts, and even insurance policies. Many life insurance policies have no cash value, however. Rather, the policy pays only if and when the covered spouse dies during the term of the policy. Because there is no cash value, there is nothing to be divided.