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Divorce and Life Insurance
Sunday, 12 December 2010 14:27

When getting divorced, one area of your financial life that you should take into consideration is the life insurance you and your ex-spouse own, in particular if you have children together, but also if you continue to maintain financial ties due to common debt obligations or a business relationship.

It is not unusual for people to be angry during and following a divorce proceeding, but one should exercise due care regarding their life insurance coverages. I have observed people canceling life insurance after a divorce, often because they were angry, and didn't want any connection with their ex-spouse. Sometimes, they just think they don't need the life insurance anymore, although in many cases, the need for coverage is still there.

For example, if a couple get divorced, and have children together. A parent's financial obligations do not stop because the marriage is over. If one parent is paying child support to the other, that money will stop if the payer dies.

There are two ways of protecting that income with life insurance.

  • The first is for the child support payer to purchase, own, and pay the premiums for insurance, naming their ex-spouse as beneficiary.

  • The second is for the recipient of child support to purchase, own, and pay the premiums for insurance on the child support payer, naming their self as the beneficiary of the life insurance policy.

Either way, the income is protected, in case the child support payer dies while making child support payments.

The death of a custodial parent is also an insurable risk, even when they are not the primary source of income. For example, a non-working stay-at-home parent. While they may not generate income from a job outside of the home, their daily duties taking care of children would need to be replaced with outside labor after their death, and that outside help will cost money. A parent that is paying child support to a custodial parent who does not work outside the home should own life insurance on the custodial parent to provide income sufficient for child care.

The most common problem is getting both parties to agree to who should pay the premiums, who should own the policy, who should be the beneficiary.

That's where a professional life insurance agent can help.

The purchase of life insurance is a serious decision, with significant financial implications for you and your family. That is why it is always a good idea to use a professional life insurance agent when purchasing life insurance. The best choice is an insurance agent that has earned the professional designation, Chartered Life Underwriter.

Do you have a life insurance agent? I'd like to apply for the job.

 

Brent D. Gardner, CLU, ChFC