Divorce is a hard time for everyone involved. It may be easy to forget some important things when you start to discuss the sour subject of settlement with your soon-to-be-ex. One of the things you don’t want to forget is life insurance is your remaining family who will be with you after your divorce: Your children.
Why you need to decide for divorce life insurance
- Children. When you were married to your spouse, you both probably took out life insurance policies and named each other beneficiary. Well, life insurance after divorce usually means that each spouse will name someone else as a beneficiary. It is important to discuss naming your children on the policy. Your children need to be financial taken care of if something were to happen to either parent.
- Who Will Own the Policy. The person who owns the policy will have the right to make changes to it. Many times, a couple is unable to decide who should own it because they both want control. This may be something that the court will have to decide on if either spouse does not relinquish ownership.
- Alimony. Life insurance in divorce does not always have to do with children. If your spouse made more money than you or you did not work to take care of your children, your spouse will also need to keep you as a beneficiary on the life insurance after divorce. If your ex-spouse passes while you are still collecting alimony, you will be entitled to those benefits as well.
Cleaning up the pieces, planning for a future life
After all of the divorce proceedings are complete — and you’re well on your way to moving on — you’ll want to continually keep an eye on your life insurance policy. How you foster your plan will pay dividends in the future, both for you and your children.
Here are three life insurance matters you should keep in mind:
- Have my coverage needs changed? Your spouse may have been the breadwinner prior to the divorce. For this reason, it’s possible that your household income has dramatically decreased. A life insurance policy can help provide for college expenses and future needs for your children.
- Should I change plans? Provided that you’re not under court order to maintain the life insurance as it is, now may be a time to change the terms or type of your policy. In fact, after a divorce you may find yourself with more cash coming in than going out due to a cutback in your expenses. You can use this extra cash to set up a nest egg for your children. A whole life insurance policy works a lot like a 401K or mutual fund — it earns interest and builds cash value, which you can deduct while you’re alive.
- Assessing riders. Riders are options on your life insurance. You can maintain your coverage, but circumstances may have changed. Some good riders to consider are “waiver of premium” and “disability income.” These two riders are specifically suited to the life of a single divorcee. Chances are high that you’ll need extras on your policy due to changes in your marriage status!
Laws That Pertain to Life Insurance During Divorce
A particularly painful situation can be the reality of dealing with life insurance vis-à-vis divorce. Knowing your rights and knowing your entitlements are essential to getting successfully and happily through any legal situation and entanglement, and this is no different. The laws pertaining to life insurance during divorce can be confusing and difficult, but are necessary for ensuring that policies get handled the right way and that these long personal and financial investments are salvaged.
During divorce, a husband can be forced to leave a certain amount of his life insurance to a child as a beneficiary. On the other hand, if you have not decided on provisions during divorce, you cannot go back to modify your life insurance policies resulting from your divorce years later, unless you show reason why things have changed to make this necessary.
Other life insurance laws during divorce
If laws involving life insurance are broken by a husband or a wife during divorce, the estranged party has the right to demand a court order of the other party to amend the situation involving life insurance.
After a divorce, to get a life insurance death benefit, you must still be named a beneficiary or be renamed a beneficiary. If you are not named, you will not receive a benefit, even if you were named prior to the divorce. If there is a clause in the divorce or the policy stating that mutual children must receive the benefit, even if there are children with different marriages, the mutual children will still be listed as partial beneficiaries.
- Life-Insurance-Divorce.com -
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