Some life insurance policies have cash value that can be considered in a divorce. Types of life insurance policies with cash value include whole life, universal life, variable life, and indexed life insurance. Click here for an article that explains these types of insurance. A term life insurance policy may have an owner, but it does not have surrender value that would go on a property division spreadsheet.
Life insurance is separate property or community property depending on when the policy was first purchased, just like a house is. The “inception of title” rule applies to life insurance policies, according to cases such as Rolls v. Rolls, No. 03-14-00435-CV (Tex. App.-Austin Jan. 14, 2016, no pet.) (mem. op.). In that case, the husband (Otis) bought a cash life insurance policy in 1988, married in 2002 and divorced in 2014. The Austin Court of Appeals in this case held:
Insurance policies are governed by the inception-of-title doctrine, meaning the separate or community character of a policy is determined by the time and circumstances of its acquisition. Otis’s insurance policy, having been acquired before the marriage, is his separate property. At most, Susan could only seek a portion of the reimbursement the community estate might be entitled to for premiums paid during the marriage.
(citations omitted).