Women and Insurance

Life Insurance in a Divorce – What You Need to Know

Going through a divorce? There are numerous financial decisions you’ll have to make as you divide up assets and determine custody arrangements (if you have children). Giving serious thought to the financial implications of a divorce can set you up for a successful future as you recalibrate. If you’re going through a divorce, here are some tips to help make sure you have the life insurance you need to protect yourself and any dependents.

Uncouple accounts

First, you’ll want to figure out how to uncouple joint checking, savings, investment and credit card accounts. You’ll also want to look at other assets you may have managed with your partner and figure out how they will be allocated between the two of you. After you have done this, take a good look at the life insurance that is protecting your family. If your spouse’s life insurance policy was initially intended to provide for everyone, it’s important to make sure you and your dependents will have the coverage you need in your new world order.

Consider if you need your own policy

If you or any children will no longer be beneficiaries of your spouse’s policy, it may be time to get your own policy. Namely, if divorce is making you a single parent, you will want to make sure your dependents can be financially secure if something happens to you.

Will you still have full or joint custody of your children? In either case, you may want to adjust your own coverage to ensure that they’ll be well taken care of. This makes sense if you will make alimony or child support payments and your children will depend on this income. One way you can leave a legacy is to help pay for their education and well-being after you are gone.

Adjust your beneficiaries

If you already have a policy, consider whether you’ll need to change the beneficiaries listed. For example, you may no longer want your soon-to-be ex-spouse to be a beneficiary. Many life insurance policies allow for revocable beneficiaries, meaning you can change your beneficiaries whenever you wish. Parents, siblings and children usually fall into this category – you can check with your life insurance provider to be sure. 

Are you required to keep a spouse on your policy? Your divorce decree should cover life insurance details like this, including who should be paying for the premiums.

Removing your spouse as a beneficiary on your life insurance policy means that you may also want to check things like wills, advanced health care directives, retirement accounts, savings accounts or any other accounts that would pay out a beneficiary upon death.

Consider taking out a policy on your ex-spouse

Will you be receiving alimony or child support payments? It’s important to make sure the income expected from those payments is insured as well. Judges may sometimes mandate in a divorce decree that the non-primary parent carry life insurance coverage. If you lose this income source, it could adversely impact your ability to maintain your current lifestyle.

In some cases, if certain conditions are met (such as being able to show that you have an “insurable interest”), you could take out a basic life insurance policy on your ex-spouse and pay the premiums directly. By doing this, you will not have to worry about the policy lapsing if they forget to pay. 

Is the spouse providing financial support uninsurable? Changes to the divorce decree can often be made to make sure you are not left financially exposed so it’s wise to consider this before you finalize your divorce decree.

Make sure you’ve adjusted your other insurance policies

Lastly, don’t forget about other insurance policies that have historically been shared as well, like health insurance and auto insurance.

Knowing that you’ve adjusted your insurance policies, your will and your investment accounts can provide peace of mind during a difficult time.

If you have questions about how to adjust your life insurance policies in a divorce, don’t hesitate to reach out with any questions. We are always happy to help.