When a couple decides to end a marriage, the untangling of assets and property begins. During this often traumatic period, it’s important for each individual partner to understand the existing and anticipated debts and financial obligations that will follow them into their new, separate lives. To ensure your financial well-being, as well as that of your children (if you have any), now is the time to review, evaluate and update your life insurance policies.
Each life insurance policy has a policy owner (the person covered) and one or several beneficiaries (who receive the money if the policy owner dies). Married couples typically list each other as primary beneficiaries on their life insurance policies, and divorce may or may not be grounds for changing it. If one is dependent on the other for alimony or child support payments, for example, their death would cause a loss of income and the benefits from a life insurance policy would provide welcome relief to the surviving family members. The spouse primarily responsible for raising the children should also be covered by a substantial life insurance policy to pay the costly childcare expenses that would be incurred following their death.
Negotiation of life insurance should not be overlooked in divorce proceedings, and the funds to pay for the policy should be included in the divorce agreement. This provides the assurance that the beneficiary’s financial future is protected, even if they fall on hard times and might otherwise be in danger of causing the policy to lapse due to non-payment.
There are many other factors (such as tax implications and the ages of minor children) and options (including establishing trusts) that impact a divorcing couple’s life insurance settlement decisions. The counsel of a trusted and knowledgeable lawyer is highly recommended to sort through the myriad implications of a divorce on your life insurance portfolio.
My Insurance Expert has been assisting individuals and families with their insurance needs for over 30 years and has a team of licensed Advisors available for free one-on-one consultations.