How to Think About Life Insurance During a Divorce: A Guide for Canadians

Life insurance is easy to overlook in the swirl of paperwork you need for financial disclosure in a divorce. However, it is one of the most important pieces to get right for your long-term financial security, especially  for couples separating after years of building a life together.

Most couples don’t think of a life insurance policy as something to “divide.” And yet, within the framework of family law, the way you structure your coverage can shape the future security of your children, the stability of child or spousal support, and your ability to move forward with confidence.

At Fairway Divorce Solutions, this kind of quiet but important planning is part of how we help you protect what matters most: your children, your assets, and your ability to start a new chapter in your life with clarity and dignity.

Term vs. permanent life insurance in a Canadian divorce

Essentially there are two types of life insurance: Term Life and Permanent Life. 

Term Life: support protection, not property

Term life insurance usually has no cash value. Because of that, it typically does not factor into the division of assets in the same way as investments, pensions, or property. Its value is not in what it is worth today, it is in the benefit it guarantees tomorrow.

When a parent is responsible for child support, a term life insurance policy can act as a financial lifeline. It helps to secure  the financial support your children and former spouse rely on, when the payor passes away.

Permanent Life: a financial asset with real value

Permanent Life policies, such as whole life or universal life, can build significant cash value over time. That cash value is usually treated as part of the marital estate and should be disclosed and considered during separation, along with other assets.

In our structured process, Divorce Resolution Mediators and Financial Divorce Mediators help clients identify and understand each life insurance policy as part of the overall “family assets” picture. For some, it is a forgotten investment; for others, the primary benefit is the long-term tax-sheltered growth it provides for their future financial security.

Life insurance as security for support

When one spouse is making long-term support payments, an important question arises: What happens if they pass away unexpectedly? That is where a life insurance policy becomes more than a contract—it becomes a way to keep a promise.

Whether the policy is new or existing, the goal is clear: make sure children and ex-partners continue to receive the financial benefit they depend on. In practice, this is often formalized in a divorce agreement and can include:

• Maintaining adequate coverage for as long as support is owed.

• Naming an appropriate primary beneficiary (often a trust for children) to manage the payout.

• Understanding the difference between a revocable beneficiary and an irrevocable one to ensure the policy cannot be changed without consent.

• Transferring ownership of the policy so it cannot be canceled without notice.

Fairway Divorce Solutions clients often tell us this is one of the most calming parts of their plan. One mom put it simply: “I don’t want to fight about money. I just want to know our kids will be okay.”

What you may need to update right now

Even if you are not sure yet what to do with each life insurance policy, there are a few essential steps to consider and discuss in divorce mediation:

Review your beneficiaries

Separation or divorce, on its own, usually does not change your beneficiary. If your ex-spouse is still named as the primary beneficiary, they may still receive the benefit in the event of your passing. Before you make changes, check any existing divorce agreement or court order, especially if you currently have a revocable beneficiary.

Confirm who owns each policy

Ownership controls the policy. The owner can usually change beneficiaries, cancel coverage, or access cash value. If you are responsible for support, your ex-spouse or their advisor may ask to become the policy owner to ensure the coverage stays in place, and their financial security remains intact.

Include employer policies in your disclosure

Group life insurance through work is often overlooked. During financial disclosure, list any employer-sponsored life insurance policy along with your personal ones so there is a clear, shared financial picture for the mediation process.

How life insurance fits into our Nurtured Children Plan™

At Fairway Divorce Solutions, life insurance is part of a broader commitment to protecting children emotionally and financially. Through our Nurtured Children Plan™, we help parents design arrangements that protect their children. That often includes making sure the benefit from a life insurance policy is aligned with:

• Your parenting plan,

• Child support arrangements,

• And your long-term plans for housing, education, and day-to-day expenses.

Life insurance mediation checklist

Use this checklist to make your mediation easier. When you walk into the room with this information ready, then the conversation is calmer, and less stressful.

Bring details for each of the following:

✓ List of all term and permanent life insurance policies

✓ Group / employer-sponsored policies

✓ Identification of the primary beneficiary for each policy

✓ Confirmation of whether you have a revocable beneficiary or an irrevocable one

✓ Cash value (if any) of permanent policies

Final thoughts

A life insurance policy may not feel urgent in the middle of a separation, but it is one of the tools that can prevent major issues down the line. It ensures support continues and your financial arrangements hold up, no matter what happens.

Fairway Divorce Solutions offers a flat-fee, structured process designed to reach agreement in about 120 days from full financial disclosure. Life insurance is one of the “small details” that make a big difference. When handled thoughtfully within the context of family law, it supports the larger goal: a fair resolution that lets you move on with your life.

Frequently asked questions

Is every life insurance policy always part of my divorce settlement? 

Not always, but they should always be disclosed. In Canada, an important distinction is between policies that have real, present-day value and those that do not. A term life insurance policy typically has no cash value, while permanent insurance may build value that is considered part of the marital estate.

Do I have to keep my ex-spouse as the primary beneficiary? 

Not necessarily, but it is important not to assume it changes automatically. If you have a revocable beneficiary, you usually need to update the designation with the insurer. However, a divorce agreement may require an ex-spouse to remain the beneficiary to ensure they receive the benefit if support is still owed.

Why does ownership of the policy matter? 

The owner can typically cancel coverage or change payment arrangements. When a life insurance policy is meant to provide financial security for support, agreements often build in safeguards so coverage cannot quietly disappear.

What if I don’t have life insurance or my coverage isn’t enough? 

In mediation, you can discuss how much coverage makes sense and who should pay the premiums. If a new life insurance policy is unaffordable, you can explore alternative ways to secure support, such as different property arrangements or financial safeguards.