Insights

Can Ningbo buy insurance to transfer common property to avoid division?

Ningbo Author：LuXu WANG

During a divorce, one party suddenly purchases a large-amount insurance policy using marital joint income, believing that “once the money is with the insurance company, it’s safe.” Conclusion first: the cash value of the policy belongs to the property, and the cash value of the policy formed by paying the premium with the joint income after marriage belongs to the joint property of the husband and wife, which will still be divided in case of divorce. Assault insurance with common property during marriage, especially before and after the breakdown of feelings, may constitute the "transfer of common property of husband and wife" stipulated in article 1092 of the civil code, and the insured may be divided less or even divided. The determining criteria are always the source of funds and the motivation for taking out insurance, not the “insurance” product itself.

1. The nature of the policy's cash value as joint property

first clarify two concepts: the insured amount is the amount of compensation paid by the insurance company when the insurance is out of danger; the cash value is the money that the policyholder can get back when he or she returns the insurance policy, which is the value of the savings contained in the policy. In divorce asset division, what matters is the cash value, not the coverage amount—no matter how high the coverage, the surrender value may be very low. Focusing on the wrong metric can lead to a misjudgment of “how much you can get back.”

As for the property attributes of personal insurance and premium, the judgment caliber distinguishes two categories: the cash value of the insurance policy formed by paying the premium with the joint property of the husband and wife during the existence of the marriage relationship belongs to the joint property of the husband and wife, which can be divided in the event of divorce; the personal insurance claims obtained due to personal injury or illness have personal exclusive attributes, personal property (Article 1063 of the Civil Code, "Compensation or compensation received by a party for personal injury"). Ningbo Intermediate People's Court "to the case" "divorced," the account "how to calculate?" (August 5, 2014) that is to hold this caliber: family-funded insurance premiums belong to the common property, personal insurance claims because of personal dependence belongs to personal property-the judgment standard is the source of funds rather than the form of insurance policies.

2. Why "buying insurance to avoid division" often fails

Article 1092 of the Civil Code stipulates: "If one of the spouses hides, transfers, sells, destroys or squanders the common property of the husband and wife, or forges the joint debt of the husband and wife in an attempt to encroach on the property of the other spouse, the common property of the husband and wife may be divided less or not. After the divorce, if the other party discovers the above-mentioned acts, it may file a lawsuit in the people's court, requesting another division of the joint property of the husband and wife." Whether making a sudden insurance purchase using marital property constitutes “asset transfer” hinges on three factors, as determined by the court:

  1. Whether the funds are jointly owned: Do the insurance premiums come from marital income or from personal property? The portion of the premium paid with personal property is not subject to division.
  2. Whether the insurance is proper: is it the family's normal demand for protection, or is it obviously for the purpose of segregating the property? Assault and large amount of insurance before and after the emotional breakdown, insurance for extramarital objects or parents and non-beneficiaries are all highly suspicious signals;
  3. Does it impair the spouse’s share: Does the insurance arrangement effectively deprive the spouse of the equal right to dispose of the marital property?

the time of insurance (timing) is especially sensitive: the surprise insurance on the eve of divorce and making the beneficiary and the insurance arrangement into a "seemingly legal" form are most likely to be identified as malicious transfer-the court is not looking at the shell of insurance, but the capital flow and subjective motivation behind it, and changing the layers of vest is useless.

3. Three ways to handle insurance policies during divorce

  1. Policy Surrender and Division: Terminate the insurance contract and divide the cash value as marital property. This option is suitable for policies with low surrender value and little remaining benefit from continued ownership; the drawbacks are that surrendering the policy incurs a loss, and coverage is interrupted.
  2. Policy Maintenance + Cash Value Compensation: The policy remains in force, and the party holding the policy shall compensate the other party with half of the cash value. Suitable for protection, long-term insurance policies (e. g. whole life insurance, serious illness insurance additional), surrender loss or protection is irreplaceable when more appropriate.
  3. Determination of transfer, less points or no division: if the insurance is determined to be transferred in bad faith, the court may give less points to the insured party and order it to return the corresponding value; the spouse may also sue for recourse after divorce according to the second paragraph of Article 1092 of the Civil Code.

If both parties can reach an agreement on the handling of the insurance policy, the plan can be written into the divorce agreement or the mediation document; the arrangements involving the change of the beneficiary, the insurance policy loan and so on should be confirmed in writing synchronously to avoid wrangling in the future.

4. Evidence Collection Checklist

If you suspect the other party has used marital property to purchase insurance, focus on securing four types of evidence:

  1. Premium Payment Source Record: Specify which account the premium was paid from and whether it is a joint post-marriage account—proving that the funds are marital property.
  2. Policy Information: Insured, Policyholder, Beneficiary, Insurance Type, Premium Amount, Payment Method—proving “who is insured and how much the coverage is worth.”
  3. Insurance purchase time: Does the timing of premium payments coincide with or shortly precede/ follow the breakdown of the relationship—indicating “suspicious motives”?
  4. Cash Value Table: The policy’s cash value at the time of division—proving “how much you can get back.”

By sorting out the four lines of "who pays the money, who guarantees it, how much it is worth, and when to guarantee it", the nature and handling of the policy will be clear. If the policy clue under the other party's name is unknown, you can apply for court investigation and evidence collection or apply for an investigation order to obtain the insurance record and cash value statement from the insurance company.

5. Common misconceptions

Misconception 1: Insurance purchased after marriage is considered personal property. The cash value of an insurance policy purchased with marital property constitutes marital property; only the portion of the policy that was initially purchased with premarital personal property and subsequently renewed with personal property after marriage is not subject to division, and the source of the premiums must still be proven.

Misconception No. 2: Designating children as beneficiaries will prevent asset division. The beneficiary arrangement only determines the direction of the attribution of the insurance premium and does not change the common property attribute of the cash value of the policy ".

Misconception 3: Surrendering the policy will allow you to hide the cash value. Unauthorized surrender and transfer of surrender money is a transfer of common property, and the spouse may claim to recover and dispose of less points according to the transfer; the act of surrender itself may also interrupt the protection and do more harm than good.

Myth 4: The other party has already changed the beneficiary, so there’s nothing that can be done. The unauthorized change of the beneficiary may be found invalid or treated as a transfer of property because of the damage to the rights and interests of the spouse.

6. Want to use insurance for protection: How to buy it in a "clean" way?

Insurance itself is a legitimate tool for protection and wealth transfer; the key lies in “what funds are used to purchase it, who it is purchased for, and who the beneficiary is.”

  1. Insured with personal property: the cash value of the insurance purchased with the deposit before marriage and the property clearly agreed to belong to the individual after marriage belongs to the individual property -- the key is that the insurance premium source certificate is complete, the account is independent, and it can be proved that it is not mixed with the common property;
  2. The arrangement of the beneficiaries should be transparent: the disputes of the regular insurance policies for the purpose of family protection should be the least if the husband and wife are mutual beneficiaries; for the insurance of parents and children, explain the source of funds and the purpose of insurance, so as to avoid being questioned about "transferring property" when divorcing ";
  3. Incorporate a marital property agreement: The ownership of the cash value of existing insurance policies, the source of funds for premium payments, and the designation of beneficiaries can be expressly stipulated in writing within the marital property agreement, thereby clarifying any ambiguities in advance.
  4. The formal structure for large-value assets: the need for large-value asset segregation can consider formal instruments such as insurance trusts and family trusts, but they must be assessed by professionals and established in accordance with the law-any simple idea of "hiding money in insurance is safe" cannot stand the test of divorce division.

A word of advice for ordinary families: security is security, property is property-there is no problem in buying enough family security insurance with common property, but the problem only lies in the surprise insurance and concealment insurance with "impure motives.

7. Calculation of the split policy amount

use a group of figures to visually show the treatment of the insurance policy in the division of divorce: after marriage, Zhang uses the joint income of husband and wife to insure a whole life insurance for himself, with an annual premium of 30000 yuan and 5 years paid, and the cash value of the insurance policy at the point of division is 80000 yuan. Choose one of the two processing methods:

  1. surrender division: the cash value of surrender is 80000 yuan (which may be slightly lower after deducting the handling fee), both parties get 40000 yuan respectively, and the insurance policy protection is terminated;
  2. Compensation division: the insurance policy continues to be valid, and Zhang retains and compensates half of the cash value to his spouse, that is, 40000 yuan. The guarantee is not interrupted, and the compensation can be paid in installments.

If Zhang took out the insurance three months before filing the divorce lawsuit, and the beneficiary was his mother and he never discussed with his spouse, the court is likely to determine his intention to transfer the common property. In addition to dividing the cash value, he will also give Zhang less money in the overall property division-at this time, the "saved premium" is far less than the "less property". Behind the numbers lies the same principle: motivation determines the outcome, cash value determines the compensation amount, and evidence decides the winner.

class case reference: the court held that the divorce by agreement was the true meaning, the defendant did not have the behavior of concealing or transferring property, and the property had been reasonably disposed during the divorce; the plaintiff claimed to divide the marital property, but did not claim within one year after the divorce, and all the claims were rejected beyond the period of exclusion. Trial Court: People’s Court of Yinzhou District, Ningbo City, Zhejiang Province Case No.: (2019) Zhe 02

12Min Chu 10610

8. Frequently Asked Questions

If an insurance policy was purchased with premarital savings, does it need to be divided in a divorce?

If it can be proved that the premium is all from the personal deposit before marriage, and the account is independent and not mixed with the income after marriage, the cash value of the insurance policy belongs to the personal property and does not participate in the division; but the part of the premium that continues to be paid with the common income after marriage, the corresponding cash value is still the common property and must be divided proportionally.

How should I handle the child’s education insurance policy in a divorce?

The insurance policy with children as the beneficiary or the insured is generally regarded as a gift to the children or an arrangement for the benefit of the children. Usually, the cash value is not divided directly when divorcing, and both parties negotiate to continue the payment obligation; if one party claims to divide, the court will deal with it carefully in combination with the purpose of the insurance policy and the interests of the beneficiary.

What should I do if the other party secretly cancels the insurance policy and transfers the money away?

Fixed surrender records and capital flow, claiming that this behavior constitutes the transfer of the joint property of husband and wife: in the division of divorce, the insured party is divided less or not divided; in the case of divorce, another lawsuit can be filed for division again within three years from the date of discovery in accordance with the second paragraph of Article 10

92of the Civil Code.

If the other party changed the policy beneficiary to someone else, can you claim that the change is invalid?

It can be asserted. The change of the beneficiary without the consent of the insured may be invalid according to the rules of the insurance contract, and even if the change is valid, the divorce is divided by the cash value of the policy rather than the insurance premium, and the unauthorized change of the beneficiary may also be regarded as the intention to transfer the common property, and the change party shall be treated adversely at the time of the division. Upon discovering any changes, promptly document the time and reason for the change.

For the insurance bought for parents with common property, can you ask for division during divorce? When the insurance policy is still in the payment period, who will pay the subsequent premium? How to check the cash value of the insurance policy? Who has the right to check?

You may make a claim regarding the property value corresponding to the premium. If a third person (including parents) is insured and the premium is paid with common property, the spouse may claim to divide the corresponding cash value or claim compensation from the insured party without the consent of the spouse. The policy owner shall continue to pay: if it belongs to the policyholder, the policyholder shall renew and compensate the other party for the cash value; if the two parties negotiate to change the policyholder or beneficiary, the change shall be made in accordance with the rules of the insurance contract. If the funds used to pay subsequent premiums are derived from marital property, they shall still be subject to the rules governing marital property. The insured person may inquire with the insurance company on the basis of his identity certificate; in divorce proceedings, the parties may apply to the court for investigation and collection of evidence or issue an investigation order, and the court shall obtain the insurance record and cash value statement from the insurance company; the spouse cannot directly inquire about the other party's policy and shall obtain it through litigation.

9. Practical Insights from a Lawyer

Some parties mistakenly thought that "money into the insurance company is the same as into the safe", before the divorce to buy a large amount of insurance policy, hoping to keep the property. The answer given by the case handling experience is: the cash value in the policy itself is property, and the cash value formed by using the joint income after marriage to insure belongs to the joint property of husband and wife, which should still be divided during divorce; Moreover, the sudden insurance with common property before and after the breakdown of feelings is not essentially different from the transfer of deposits and the sudden purchase of houses. Instead, it may be regarded as the transfer of common property, the insured party faces the risk of a small share in the split. The key to determining the nature of a situation has never been the “insurance” wrapper itself, but rather the source of the premium funds and the motive behind the insurance purchase.

If there is indeed an insurance policy in the marriage, it should be examined separately before any further handling. In practice, there are typically three approaches: first, retain the insurance policy and have one party compensate the other based on its cash value; second, surrender the policy and divide the cash value; third, transfer the policy rights under specific circumstances. Which option to choose depends on the cash value, whether the premiums are paid from personal or joint assets, and the wishes of both parties. Ascertaining the cash value is not as straightforward as verifying a bank deposit; it often requires obtaining records from the insurance company or requesting a court order. Therefore, it is crucial to secure the policy information as early as possible. If you suspect that the other party is rushing to insure, you should start with clues such as the time of payment, the source of the funds, and the actions after the insurance to determine whether it is an abnormal punishment.

It’s even more important to remember not to use insurance as a tool for tax avoidance. Assault large insurance, temporary change of policyholder or beneficiary, with a common property one-time payment, these actions are obvious signals in the eyes of the other party or the court, not only can not achieve the purpose of financial protection, but also may cause complications. The truly “clean” approach is to be honest and transparent in one’s asset arrangements, use personal assets to provide oneself with appropriate financial protection, and ensure clarity regarding the source of funds and the designation of beneficiaries when taking out insurance.If you have found that the other party to borrow insurance to transfer property, first fixed payment vouchers, policy information and related records, and then combined with preservation and other means to claim in a timely manner, than after the other party's theory is much more effective.

Buying insurance is not the "safe channel" to transfer common property: the capital is common, and the cash value of the insurance policy is common; the insurance with impure motives will instead become the evidence against the insured party in the divorce division. For the parties concerned, the correct posture is two-handed: if the other party is suspected of using common money to insure, check the fixed policy information with the insurance company through the premium flow to see clearly the cash value rather than the insured amount; If you do have a need for protection, you should use your personal property to insure and keep the source certificate, or clarify the ownership of the policy through a standardized marital property agreement, so that the protection function and property can be isolated.

Put insurance back where it should be: it is a risk protection tool first, and a property arrangement tool second. In the case of divorce, the cash value of the policy, the source of the premium and the motive of the policy determine its fate-instead of studying "how to hide", it is better to put the policy in the sun: to insure with personal property and leave a voucher, the family policy in the agreement to state the ownership, the beneficiary arrangement to maintain transparency. Insurance under the sun is really safe insurance.

In the final analysis, the fate of the insurance policy in divorce depends on three questions: whose money is the premium? What is the insurance policy for? Does the spouse give informed consent? The answers to the three questions are clearly written, and the division of the insurance policy is naturally clear. Instead of arguing about a policy at the time of divorce, it is better to arrange the attribution of the policy with a written agreement during the marriage-that is the lowest-cost and most effective "insurance".