Insurance Policies and the Valuation for Property Settlement Purposes
Key Points
  • Term life insurance policies do not have a current cash value, the value of the policy is only after the person dies. This is a contract between the insured and the life insurance company and money is only paid upon death.
  • Term life insurance polices may be considered as economic value and should be valued based on replacement which may actually be higher premiums.
  • There are some policies that have a cash value such as whole life policies. If there are any loans against the policy, for equitable distribution purposes, the court will subtract any loans against the policy.

As a general rule, a life insurance policy in existence at the time of valuation of property is valued at its cash surrender value.


  • Wisner v. Wisner, 129 Ariz. 333, 631 P.2d 115 (1981);
  • In re Lorenz, 146 Cal. App. 3d 464, 194 Cal. Rptr. 237 (1983);
  • In re Ryman, 172 Ill. App. 3d 599, 527 N.E.2d 18 (1988);
  • Brown v. Brown, 519 N.E.2d 1259 (Ind. Ct. App. 1988);
  • In re Marriage of Driscoll, 563 N.W.2d 640 (Iowa Ct. App. 1997);
  • Leveck v. Leveck, 614 S.W.2d 710 (Ky. Ct. App. 1981);
  • Kambur v. Kambur, 652 So. 2d 99 (La. Ct. App. 1995);
  • Mount v. Mount, 59 Md. App. 538, 476 A.2d 1175 (1984);
  • Neal v. Neal, 776 S.W.2d 861 (Mo. Ct. App. 1989);
  • Dougherty v. Dougherty, ___ A.D.2d ___, 680 N.Y.S.2d 759 (1998);
  • Dixon v. Dixon, 919 P.2d 28 (Okla. Ct. App. 1996);
  • Toler v. Toler, 292 S.C. 374, 356 S.E.2d 429 (Ct. App. 1987);
  • Caughan v. Caughan, 418 N.W.2d 791 (S.D. 1988);
  • Grost v. Grost, 561 S.W.2d 223 (Tex. Civ. App. 1977).

See generally Annotation, Divorce and Separation: Method of Valuation of Life Insurance Policies in Connection with Trial Court’s Division of Property, 54 A.L.R.4th 1203 (1987 & Supp. 1999). Of course, the court must subtract from the cash surrender value the principal amount of any outstanding loans against the policy.


  • Ritter v. Ritter, 690 So. 2d 1372 (Fla. Dist. Ct. App. 1997).

If a policy has no cash surrender value, then it has no value for purposes of property division.


  • In re Footit, 903 P.2d 1209 (Colo. Ct. App. 1995);
  • Davis v. Davis, 775 S.W.2d 942 (Ky. Ct. App. 1989);
  • C.M.D. v. J.R.D., 710 S.W.2d 474 (Mo. Ct. App. 1986);
  • Annis v. Annis, 189 A.D.2d 846, 592 N.Y.S.2d 786 (1993).

"Term life insurance" is a contract between the owner of the policy and the life insurance company whereby, in consideration for payments of premiums, the insurance company agrees to pay the beneficiary under the policy a specific amount of money if the insured dies during the term of the policy. Term life insurance has no cash surrender value or loan value. On the other hand, "whole life insurance" builds up equity in the insurance policy, and loans may be taken against it. 1 Eric Mills Holmes & Mark S. Rhodes, Holmes’s Appleman on Insurance, 2d 1.25 at 126 (1996). Consequently, the conclusion can be drawn that term life insurance is not divisible, whereas whole life insurance is.

Even though term life insurance has no cash surrender value, at least one court determined that a term life insurance policy had economic value based on its replacement cost, its convertibility to whole life, and its face value. In re Marriage of Gonzalez, 168 Cal. App. 3d 1021, 214 Cal. Rptr. 634 (1985). The Gonzalez court analogized that term life insurance policies should be valued based on their replacement value, since replacement value may be higher than cash surrender value in situations where the insurability of the insured is lessened because of advancing age or declining health.

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