Going through a divorce can leave you with many questions, like how to distribute marital assets and divide your life insurance policy.
Life insurance and divorce can seem complicated at first, especially if you and your spouse have children. When separating from your spouse, life insurance is probably the last thing on your mind, but it’s essential to make necessary policy adjustments and understand how these changes can impact your family and financial situation.
The Court May Require You to Get a Policy if You Don’t Already Have One
The divorce process often requires going to court, whether to sort out alimony or child support payments. Sometimes, the court requires you to have separate life insurance policies, which means you have to purchase a new policy during the divorce proceedings. If you already have a policy, the court may also require you to make policy adjustments for the divorce decree.
Although the court may direct you to get a life insurance policy to finalize the divorce, you can choose your policy. You have several options for life insurance, although you typically have to choose between term and whole life policies.
Term life insurance is perhaps the most popular option because it is less expensive. However, term life insurance policies only cover a certain number of years, typically between 10 and 30. They also don’t build cash value over time.
Meanwhile, whole life or permanent life insurance policies offer whole-life coverage and can become a tax-advantaged asset.
What To Do When You Already Have Life Insurance
If you already have a life insurance policy, the court may require you to make certain changes that reflect your new situation. Before making any changes, review your policy details, such as the premium amount, listed beneficiaries, expected payout, and contract length. If you have a whole life policy, the contract length is ongoing, but you should still contact the insurance provider to determine how much cash value your policy has accrued.
Let’s discuss two factors to consider about life insurance and divorce.
Life Insurance for Child Support Protection
Life insurance can act as financial protection for ex-spouses and children.
If you take primary custody of your child or children during the divorce, your ex-spouse will likely have to pay child support to help cover their clothing, food, and other necessary expenses. If the child’s other parent passes away, you lose this financial support. Your ex-spouse can list you or your child as a beneficiary for their life insurance policy so that you can use the payout to care for your child should they unexpectedly pass away.
Updated Beneficiaries
Married couples often list one spouse as the beneficiary of the other spouse’s term or permanent life insurance policy. If you and your spouse did this during your marriage and are now separating your life insurance policies, you may need to update your beneficiaries during a divorce.
If you have children, you can make them the new beneficiaries. However, if they’re minors, you should consider using a trust to distribute the funds among them. If you don’t have any children, you can choose another family member to be the beneficiary, or you can donate the life insurance payout to a charity you care about.
Schedule Your Paramedical Exam
Understanding life insurance and divorce can seem difficult at times, but taking things one step at a time helps. If you’re looking for a new life insurance policy or need to update your current one, you likely have to schedule a paramedical exam. Fortunately, Medical Profiles can make this easier by offering in-person appointments or mobile exams that come to you.
Call (832) 251-3926 to schedule your paramedical example with Medical Profiles.
