Insights

Ningbo divorce when the common property to buy insurance how to divide.

Ningbo Author：LuXu WANG

During the marriage, Ms. Wang used the couple’s joint savings to purchase an annuity insurance policy for herself; at the time of the divorce, the policy’s cash value had reached RMB 150,000. The husband insists on surrendering the insurance policy and dividing the proceeds, while Ms. Wang argues that doing so would result in substantial losses, leaving the two at an impasse. To conclude: During the subsistence of a marriage, the cash value of an insurance policy purchased with marital joint property constitutes marital joint property. Upon division, it is preferable for one spouse to retain the policy while compensating the other with half of its cash value; surrendering the policy and dividing the proceeds is generally the second-best option—surrender typically yields only the cash value, which is often less than the total premiums paid, and also results in the loss of coverage.

1. Legal Basis and Qualitative Logic

Article 1062 of the the People's Republic of China Civil CodeIt is stipulated that the wages, bonuses, remuneration for labor services, and income from production, operation, and investment received by the husband and wife during the existence of the marriage relationship are the joint property of the husband and wife. Insurance does not constitute an independent category of property as enumerated in the law; however, judicial practice has established a consistent approach to “commercial insurance policies purchased with marital common property”: the source of the premium determines the nature of the asset—premiums paid from the couple’s joint savings give rise to policy cash values that are considered marital common property; and the cash value determines the amount subject to division—at the time of divorce, only the policy’s cash value (rather than the coverage amount or the premiums already paid) is divisible.

Article 80 of the Interpretation (I) of the Supreme People's Court on the Application of the Marriage and Family Part of the the People's Republic of China Civil CodeAlthough it is aimed at old-age insurance, the spirit of the rules can be referred to: "at the time of divorce, if one of the spouses has not retired and does not meet the conditions for receiving the basic pension, and the other party requests to divide the basic pension according to the joint property of the husband and wife, the people's court will not support it; after marriage, the basic pension insurance premium is paid by the joint property of the husband and wife, the people's court should support it. "(I) Article 25 of the Supplementary Interpretations also includes 'basic pension benefits actually obtained or that should be obtained' during the marriage within the scope of joint property." With respect to commercial insurance, the cash value accumulated through contributions made with marital property is, in nature, equivalent to “property rights acquired through marital property invested after marriage” and should therefore be included in the scope of division—this is the prevailing judicial practice in Ningbo and courts nationwide.

There are also two types of special insurance benefits that need to be distinguished: First, the insurance claims obtained due to accidental injury, major illness, disability, etc., have the attributes of personal injury compensation and protection, according to Article 1063 of the Civil Code The second item (the compensation or compensation obtained by one party due to personal injury is personal property) belongs to the insured's personal property and is not divided in the event of divorce; second, the death insurance money is assigned to the beneficiary, it does not belong to the estate of the insured and is not treated as the joint property of the husband and wife.

Breakdown of 2. scenarios: six insurance patterns, six treatments

1. Purchase before marriage and the premium has been paid before marriage.Belonging to one party's personal property, divorce is not divided-keep the insurance time and payment voucher can be.

2. Purchase before marriage and renewal of premiums with joint property after marriage.The cash value corresponding to the part paid before marriage is personal property, and the cash value and value added corresponding to the part paid in common property after marriage can be divided into common property-calculated according to the proportion of contributions.

3. Insured with common property after marriage (annuity insurance, dividend insurance, life insurance and other savings and investment categories).The cash value of the policy is common property and can be divided.

4. The parents contribute to the purchase of insurance for one party and expressly give it to that party.In accordance with the spirit of the will or gift contract, it is the personal property of that party (Article 1063, paragraph 3, of the Civil Code).

5. Policies for minor children.The insurance interest belongs to the child, has the nature of personal protection, the court tends not to force the withdrawal of the insurance, the insured party continues to hold and pay the premium, the other party does not need to pay the cash value.

6. Claims for health insurance, accident insurance and the death insurance of the designated beneficiary.Fall into the scope of "personal injury compensation personal property" and "beneficiary ownership" respectively, and are not divided in the event of divorce, but the cash value of the policy can still be divided if the health insurance includes the nature of the return of savings and is insured with common property.

3. segmentation: a trade-off between the three options

Option 1 (preferred): One party holds the policy and pays half the cash value to the other party.The insured/policyholder continues to hold the policy, maintains the protection without interruption, and compensates the other party with half of the cash value in cash. This is the option that minimizes losses, particularly suitable for situations where policy benefits are stable and surrender penalties are substantial. The holder should pay close attention to its own cash flow—compensation payments are typically required to be made in a lump sum or in short-term installments as agreed.

Option 2: Continue to hold after changing the policyholder or beneficiary.If the policy is owned by the other party, the policyholder shall be changed (subject to the consent of the insured). To process the change, submit your identification and divorce documents as required by the insurance company.

Option 3 (sub-optimal): Sanct the cash value equally.The withdrawal can only get back the cash value, the initial cash value of the insurance is usually significantly lower than the premium paid, and both parties lose protection, generally not cost-effective.

In practice, the policy can also be "packaged" with other common property: one party acquires the policy, the other party gets an equivalent share of the deposit or property, through the property portfolio hedging, to avoid the withdrawal of a policy caused by a double loss.

When both parties are unwilling to continue to hold and the cash value is high, they can also negotiate that one party will continue to hold after the transfer, the other party will be compensated, and the source of renewal premium will be agreed. If dividend insurance and universal insurance are involved, the account value shall be checked together with the guaranteed interest rate clause-the policy valuation shall be converted according to the cash value when "package swap" to avoid overestimation or underestimation when swapping with other properties.

4. Procedure and Material List

  1. List all policies: insurance company, insurance type, insured, insured, beneficiary, payment status and current cash value;
  2. Determine the source of premiums: distinguish between pre-marital individual contributions, post-marital co-contributions and parental gift contributions, and collect vouchers separately;
  3. Obtain proof of cash value: apply to the insurance company's counter or official customer service for a statement of the cash value of the policy or a statement of the amount of the withdrawal, as a basis for division;
  4. Negotiated division plan: give priority to determining "who holds, who will compensate and how much", and form a written agreement after negotiation;
  5. For change procedures: if the policy is owned by one party, the policyholder and beneficiary shall be changed in a timely manner to avoid disputes over the invalidation of the policy or the attribution of claims.

5. the boundaries of cash value, claims and survival benefits.

The attributes of the three kinds of "money" are completely different, and they should be distinguished before division: the cash value of the policy is the amount refunded by the insurance company when the insurance is surrendered or terminated, which is a divisible property right and shall be subject to the cash value statement issued by the insurance company; The death insurance money shall be owned by the beneficiary when the beneficiary is designated. If the beneficiary is not designated or the beneficiary dies before the insured, it shall be treated as the insured; survival, maturity, dividends and other insurance benefits paid in accordance with the contract, part of the joint property acquired during marriage, pre-marital insurance after marriage received according to the payment period and the contract agreement split. Claim proceeds from health and accident insurance are considered personal property due to their personal nature; however, for a health insurance policy where premiums were paid using marital assets, the cash value returned upon cancellation of the contract remains subject to division—“the coverage is on the person” and “the funds paid are marital property” must be treated separately. The most direct way to confirm the cash value is to request from the insurance company a policy cash value schedule or an explanation of the surrender value. If one party conceals information about the policy, the other party may, in divorce proceedings, petition the court to investigate the policy’s subscription records and premium payment history.

Policy renewal and change operations after 6. divorce

After the division plan falls to the ground, there are still three finishing things: first, the policyholder changes-if the policy belongs to the other party, apply to the insurance company in time to change the policyholder (usually with the written consent of the insured), and the original policyholder will no longer bear the obligation to pay the fee; Second, the beneficiary adjustment-after the divorce, the original arrangement with the spouse as the beneficiary will be changed in time to prevent the compensation from flowing to the divorced party; third, the renewal of payment-agreed by who will continue to pay the premium, the consequences of the suspension (policy suspension, cash value reduction, re-effect conditions) to write down. These procedures typically involve bringing both parties’ identification documents and the divorce decree to the insurance company’s counter for processing. Requirements may vary slightly among insurers, so it is advisable to confirm by phone in advance. Only after completing these formalities is the policy division considered fully finalized.

7. Common Misunderstandings and Positive Solutions

Myth 1: surrender will lose, so this policy does not need to be divided.Positive solution: low cash value does not mean no division-the cash value formed by common property contributions must still be divided, and the holder compensates the other party according to the cash value.

Myth 2: The policyholder writes whose name, the policy is whose.Positive solution: the attribution of cash value depends on the source of the premium, not on the name of the policyholder-if the common property is insured, the cash value is the common property.

Myth 3: Survival benefits and dividends have not been received, so there is no need to divide them.Positive solution: The survival benefits, dividends and other insurance income arising from the insurance of common property in marriage are common property.

Myth 4: When you buy insurance for your child, who takes the policy when you divorce has the final say.Positive solution: the benefits of the policy insured for the children belong to the children, usually not divided, not withdrawn, by the original insured party to continue to pay.

Myth 5: If the beneficiary writes the child's name, no one can move the money.Positive solution: the death insurance premium belongs to the designated beneficiary (child), but if the insurance is insured with common property and the beneficiary arrangement clearly exceeds the reasonable protection needs, the court may deal with it in the light of the specific circumstances-the beneficiary arrangement should take into account the purpose of protection and the fairness of the property.

Myth 6: The income of annum insurance and dividend insurance is not "income" and does not need to be divided.Positive solution: the annuity and dividend generated by the insurance of common property in marriage belong to the investment income of common property.

Myth 7: The policy is a long-term contract, the court can not control the divorce.Positive solution: the division of the cash value of the policy has a mature judgment caliber-the court can award the holder to compensate half of the cash value, or decide to change the policyholder.

Myth 8: After the divorce, the other party can only admit bad luck.Positive solution: If the agreement stipulates that the renewal premium shall bear and break the consequences of the breach, it may be recovered in accordance with the contract; if it is not agreed, if the policy is invalid and the cash value is damaged due to the break, it may claim compensation for the loss.

Myth 9: Insurance segmentation can only be "two choices"-either surrender or no distinction.Positive solution: the scheme is a combination: one party holds plus compensation, changes the policyholder, swaps with other property, agrees to adjust the beneficiary, lists the options first and then selects the combination, don't narrow the road.

Case Reference: In the case of property dispute after the divorce between Yan and Li, one party's policy insured for the husband and wife during the marriage was withdrawn by the other party without authorization. The court held that the cash value received upon cancellation of an insurance policy constitutes marital property and ordered the defendant to pay the plaintiff one-half thereof, amounting to RMB 63,227.38; meanwhile, any cash value derived from insurance policies purchased for the children belongs to the children. This clarifies that, where insurance is purchased using marital property, only the cash value of the policy is subject to division upon divorce. Trial Court: Wenling People’s Court Case No.: (2019) Zhe 10

81Min Chu 4273

8. FAQ

Can you "hide" the couple's joint property by buying insurance?

Can't hide. Insuring jointly owned property does not alter its nature—the cash value of the insurance policy remains part of the marital estate and is subject to division upon divorce; intentionally concealing such arrangements or taking out large insurance policies on short notice may result in a smaller share or no share of the estate during the division, as it could be deemed an attempt to transfer assets. Insurance records and payment histories can both be verified during divorce asset declarations and court investigations.

Who is the policyholder, the policy belongs to who?

No. The policyholder is merely a party to the contract; the ownership of the policy’s cash value depends on the source of the premium payments: the cash value accumulated from premiums paid with marital property is marital property, regardless of whose name appears on the policy. The determining criterion has always been “where the money comes from.”

Is it fairest to divide the surrender equally?

Usually not. When you surrender a policy, you can only receive the cash value, which in the early years is often less than the premiums paid, resulting in losses for both parties and the loss of coverage. “In most cases, ‘one party holds the policy plus half of its cash value as compensation’ is the better option; if neither party wishes to retain the policy, they should first compare the surrender loss with the holding value before making a decision.”

Is the claim for serious illness insurance and accident insurance to be divided?

Indistinguishable. Life insurance claim proceeds arising from accidents, illnesses, or disabilities have the nature of personal injury compensation and constitute the personal property of the insured (Article 1063, Paragraph 2 of the Civil Code); death benefit proceeds designated for a beneficiary shall belong to the beneficiary. What is truly divisible is the cash value of a savings investment policy insured with common property.

Do you have to deal with the insurance you buy for your children when you divorce?

Generally not divided. The benefits under an insurance policy purchased for a child belong to the child; courts tend to uphold the validity of the policy and require the original policyholder to continue making premium payments. The parties may enter into a separate agreement regarding the allocation of subsequent premium obligations. If one party unilaterally surrenders the insurance policy for its cash value, the other party may claim restitution or compensation.

Practical Experience of 9. Lawyers

If you buy insurance with common property during marriage, don't rush to "refund or not" when you divorce ". The first step is to gather all the insurance policies in your household—life insurance, annuities, and investment-linked policies—then carefully record the policyholder, insured person, beneficiary, annual premium, and current cash value for each one. The cash value is the figure that truly matters when it comes to division; it is entirely separate from “how much premium has already been paid.” Many people assume that the more they pay, the more they’ll get back, but when they actually calculate it, they often find that the cash value is lower than the premiums already paid. In such cases, surrendering the policy to receive a payout is usually the most financially disadvantageous option.

The safer treatment is to let the party more in need of protection continue to hold the policy, and then pay compensation to the other party according to half of the cash value. When it comes to survival benefits and claim proceeds, it is also necessary to determine whether the corresponding rights belong to the insured, the beneficiary, or the policyholder; they cannot be treated indiscriminately as joint property for division. Whether the policyholder and beneficiary need to be changed should also be clearly specified in the agreement in advance to prevent one party from making unauthorized changes after the divorce.

At the operational level, the policy number and the underwriting company should be recorded before the prosecution, and the insurance record should be applied for when necessary; after the negotiation, those who can change the policyholder and beneficiary should go to the insurance company as soon as possible, and those who need to surrender or transfer the cash value should write the amount and the time of receipt into the agreement. Most companies only accept the policyholder himself to handle the change. If the policy is in the hands of the other party, you should take the evidence collection and communication in advance, and if necessary, submit a request to the court in the lawsuit. This kind of property is most afraid of dragging on. If it is delayed for a long time, the cash value will change, and the other party may withdraw the insurance and cash out in the middle. The clues and actions will be pushed forward so as not to leave only one empty insurance policy in the end.

The formula of insurance policy division is "the source of premium is determined by nature, the cash value is determined by amount, and surrender is not the optimal solution": the cash value of joint property payment is included in the division, the holder compensates half of the cash value, and the change of the insured and the beneficiary is handled in time; the claim payment and the death insurance payment of the designated beneficiary keep the personal attribute and do not divide. For the parties concerned, the insurance policy paid before marriage retains the payment certificate and the insurance time certificate, the retention payment record of the joint property payment after marriage and regularly asks the insurance company for the cash value statement-when the certificate is complete, the division of an insurance policy can be negotiated within half an hour.