When you get married, you don’t expect that someday you may get divorced. But, with 40 to 50 percent of marriages in the United States resulting in divorce, it’s not an uncommon practice.
There are many details to sort out during the divorce process, one of them being life insurance. Typically life insurance is in some way connected to your spouse and you will need to determine what changes need to be made to make sure you are covered for the future. Here are a few things to think about when it comes to life insurance after divorce.
If you have a life insurance policy, you most likely have your spouse listed as your beneficiary. You may want to consider changing your beneficiary designation to someone other than your spouse. If you were to pass away after your divorce, you want to ensure the death benefit goes to the person you wish to receive it.
Future Alimony and Child Support
Alimony payments are to help the dependent spouse maintain the lifestyle they have grown accustomed to. Child support helps cover child care costs and other expenses associated with being a full-time parent. If the person ordered to provide these payments to their ex-spouse were to pass away it could create a financial burden.
If you are to receive alimony or child support after your divorce, you may want to consider protecting this income with a life insurance policy. Just as you may have a policy to protect your loved ones financially if you were to die, you need to protect this income as well. Setting up a policy on your ex-spouse with you as the policy owner is a great option to protect that income. Make sure that the policy is adequate enough to replace the money you would be receiving for alimony and/ or child support.
Making yourself the policy owner ensures that you know if the policy is being paid. If your ex-spouse misses payments, the policy can lapse and ultimately be canceled. Another option would be to pay the premium yourself.
Another benefit of you being the policy owner is that you are in charge of making any changes to the policy, including making beneficiary changes. If your ex was the policy owner, this would allow them to change the beneficiary from you to someone else, leaving your income unprotected.
Term life insurance is a great option if you are looking to protect your alimony and/or child support income. Term is cost effective and offers a specified period of coverage time. If you are receiving alimony, typically you receive payments until you remarry. If you don’t plan on remarrying, then you may want to consider a more permanent insurance policy. If you are receiving child support, you receive payments until your children are adults, making a term policy is appropriate.