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My (soon to be) ex-wife and I are finalizing our divorce. We have no children and there is no alimony. We are splitting our marital property and each getting a house so there is no financial obligation or deficit for either party. There is an existing term life insurance policy on me (I'm the insured) and I do not consent for my ex-wife to keep it in effect. Can she, even without my consent? We live in Georgia.

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  • I remember an ex-colleague getting into real trouble with his wife when she found his long gone and forgotten ex-girlfriend was still beneficiary of his life insurance. Different country, and apparently the wife wouldn’t have got a penny had he died. – gnasher729 Oct 15 '20 at 13:04
  • Check out with the insurance company if closing the life insurance gives you disadvantages. For example, you may have signed up at 20 with low premiums, and if you cancel and create a new one next year you might be 40 and pay much more. In that case check if you can just change the beneficiary. – gnasher729 Oct 15 '20 at 13:06
  • @gnasher729 A life insurance party has three parties - the insured whose death triggers the payout, the beneficiary who gets the payout, and the owner who pays the premium and determines the beneficiary. As I read the question, the wife is the owner of the policy. – ohwilleke Oct 15 '20 at 18:47
  • @ohwilleke Well, four including the insurance policy. – Acccumulation Nov 15 '20 at 4:23
  • @Acccumulation I think you mean the insurance company. – ohwilleke Nov 17 '20 at 1:05
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Current Georgia law, which has substantially re-written the code since 1985, introduces the concept of "stranger-originated life insurance" (STOLI), as of 2005. It is a specific case of "fraudulent life settlement act", which is

Acts or omissions committed by any person who, knowingly and with intent to defraud, for the purpose of depriving another of property or for pecuniary gain, engages in acts, or permits its employees or its agents to engage in acts, including, but not limited to: (i) Presenting, causing to be presented, or preparing with knowledge and belief that it will be presented to or by a provider, premium finance lender, life settlement broker, insurer, insurance producer, or any other person, false material information, or concealing material information, as part of, in support of, or concerning a fact material to one or more of the following...(X) Stranger originated life insurance as defined in paragraph (24) of this Code section

which says

a series of acts or a practice to initiate a life insurance policy for the benefit of a third-party investor who, at the time of policy origination, has no insurable interest in the insured. Stranger originated life insurance acts or practices include, but are not limited to, cases in which life insurance is purchased with resources or guarantees from or through a person or entity who, at the time of policy inception, could not lawfully initiate the policy himself or herself or itself, and where, at the time of inception, there is an arrangement or agreement to directly or indirectly transfer the ownership of the policy or the policy benefits to a third party. Trusts that are created to give the appearance of insurable interest and are used to initiate policies for investors violate insurable interest laws and the prohibition against wagering on life. Stranger originated life insurance arrangements do not include those practices set forth in subparagraph (C) of paragraph (11) of this Code section.

As stated in the NCOIL Life Settlements Model Act which Georgia adopted,

It is an essential public policy objective to protect consumers against stranger-originated life insurance (STOLI). STOLI is a practice or plan to initiate a life insurance policy for the benefit of a third party investor who, at the time of policy origination, has no insurable interest in theinsured. STOLI practices include but are not limited to cases in which life insurance is purchased with resources or guarantees from or through a person, or entity, who, at the time of policy inception, could not lawfully initiate the policy themselves, and where, at the time of inception, there is an arrangement or agreement, whether verbal or written, to directly or indirectly transfer the ownership of the policy and/or the policy benefits to a third party. Trusts, that are created to give the appearance of insurable interest,and are used to initiate policies for investors, violate insurable interest laws and the prohibition against wagering on life.

STOLI thus refers to a scheme to obtain insurance without insurable interest at its inception, and does not include an alleged loss of insurable interest. I conclude that such life insurance is not statutorily prohibited in Georgia: which does not preclude the possibility that the insurance contract precludes such an arrangement, and that the owner has an obligation to report the divorce. It's also not clear that the wife totally lacks all insurable interest, given the existence of retirement plans including Social Security.

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Can my ex-wife keep a term life insurance policy on me that was started while we were married?

No. Even if the terms of the policy don't automatically render it null and void as a result of the divorce, the policy is voidable by you insofar as you oppose to her keeping the policy in effect.

Your description altogether reflects a change of circumstances such that your ex-wife can no longer posit that you represent an insurable interest. See *Wood v. N.Y. Life Ins. Co., *255 Ga. 300, 303-304 (1985):

The statutory requirement of insurable interest was intended to prevent wagering on human lives. The insurable interest requirement is inbred with a potential conflict of interest when one with an insurable interest obtains coverage on the insured without the insured's consent.

[...]

[I]t is against public policy to procure insurance on the life of another without his consent

(citations omitted).

You should approach the insurer (and consult the policy terms) to ensure that everybody is on the same page.

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  • Thank you. So, it doesn't matter that the term life insurance policy is already in place (taken out during the marriage)? It makes sense that she can't take one out now. – FeelingNervous Oct 15 '20 at 14:26
  • @FeelingNervous No. In fact, most likely the insurance policy has provisions related to changes in circumstances and the policyholder's duty to notify these. The cessation of insurable interest is highly relevant to both the insurer's assessment of risk and your safety (in part, because of the undesirable wagering on human lives mentioned in Wood). – Iñaki Viggers Oct 15 '20 at 15:20
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    I wouldn't be comfortable that this is the correct answer. Wife had an insurable interest when the policy was secured. It isn't clear, at least from the case cited, that the insurable interest has to continue to exist after the insurance contract is entered into. – ohwilleke Oct 15 '20 at 18:49
  • @ohwilleke "It isn't clear, at least from the case cited".Of course it is. It follows from the principle "to avoid extending to the beneficiary the temptation to hasten by improper means the time when he will receive the benefits of the policy. Insurance contracts which violate this common law rule are against public policy and are void", unenforceable, Wood at 304. A context of divorce as palpable from the OP's post suggests that said temptation likely to arise, which is more compelling than a mere cessation of an insurable interest. It is indicative of a potential conflict of interest. – Iñaki Viggers Oct 15 '20 at 19:28
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    @IñakiViggers The incentives that the public policy are involved in go to entering into a policy in the first place, not continuing one already in place which prevents the insurance company from receiving a windfall. Wood is simply not on point. – ohwilleke Oct 16 '20 at 2:01

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