Divorcees face more changes than losing a spouse throughout the separation process. It’s important to protect yourself financially when you file for divorce, and life insurance plays a vital role in your cash security.
If you’re going through a divorce and neither you nor your partner has a life insurance policy, the court could mandate the top earner to obtain a polity as part of the divorce decree to ensure the financial security of children and the surviving spouse.
Even in a non-contested divorce, costs begin to add up:
- Secure and maintain separate homes
- Loss of income or child care
- Credit and debt issues
- Family counseling as needed for children
The National Marriage Project at Rutgers University reports divorce reduces a man’s standard of living by 10 percent and can affect a woman’s by nearly three times as much.
Divorce And Insurance
If your life insurance details aren’t part of the divorce settlement and you want to remove your former partner from being a beneficiary, request your insurer send the necessary paperwork to make the change.
Other types of insurance can be affected in a divorce, including:
- Homeowners: Remove partner from policy
- Automobile: Remove partner and vehicle from policy for lower rates
- Health: Divorce qualifies as a major life event for nearly all insurance providers. File the necessary paperwork to have your partner removed from your life insurance policy if allowed per the divorce settlement.
If you had health insurance through your partner’s policy and want to retain that coverage, utilize the COBRA program to keep the coverage for up to 36 months at your own expense.
Life Insurance After Divorce
If your divorce settlement entitles you to monthly alimony and / or child support, don’t depend on that money to secure your family’s financial future. It is even more important to obtain life insurance coverage after a divorce. If you were to die unexpectedly, your children, who depend on your income or child support payments, can accept your death benefits for their living costs, college tuition, and other expenses.
The divorce lawyers for you and your partner will likely require each of you – especially the partner tasked with monthly alimony or child support payments – to maintain a life insurance policy. If one already exists, the divorce decree may mandate an increase in coverage.
If neither you nor your partner has life insurance when you enter the divorce, it’s a good idea to at least obtain a basic 20-year term life insurance policy families with young children and a 10-year term life policy if the children are older. But there are a number of choices and policies to consider:
- Term life insurance: Pay an annual premium for the policy term, which is typically 20 years. If you die within the term of the policy, your beneficiaries receive the payout.
- Whole life: The most common type of life insurance is whole life. This type of policy comes with guaranteed cash value during the life of the policy. A portion of each premium payment goes toward the policy’s cash-value account. The policyholder can withdraw cash after it accrues and use it as desired.
- Universal life insurance: For those who desire flexibility, a universal life insurance policy is best. Policyholders can withdraw or borrow cash after it accrues in the cash-value account and can adjust the death benefit amount as needed.
- Return of Premium: Return of premium is a form of term life insurance that does not include cash-value features. However, this policy can return an amount equal to what the policyholder has paid in premiums when the level premium period ends as long as the policyholder is still alive and has kept the policy active.
A divorce can be emotionally and financially draining. Secure your children’s future with a life insurance policy by speaking with an experienced agent who can thoroughly explain your options.