Getting through a divorce is never easy. When a couple finally calls it quits, one of the assets that sometimes get lost in the shuffle is the family’s life insurance policy. Are you considering changing your life insurance beneficiary? As this blog points out, failing to answer that question can occasionally have tragic consequences.
Let’s face it, the road to splitsville sucks. The process of divorce is not a pleasant one. Especially if children are involved. In many split-ups, the couple divides their joint assets and moves on. However, one of the items that sometimes falls through the cracks is the family’s life insurance policy.
If you purchased life insurance during the course of your marriage, that policy is typically listed as an asset in your estate, along with your home, furniture, cars, bank accounts, and other valuable items of equity. These items are typically divvied up during your date with destiny in divorce court.
Depending on your specific situation (no two divorces are the same), that life insurance policy can become a very important item on that asset list. For example, let’s assume that the parental rights are awarded equally to both parents…does the divorce agreement spell out how the children will be financially provided for if something unforeseen should happen to one or both parents?
This is just one of many scenarios that illustrate how owning life insurance can really make a difference in the lives of your loved ones. Sadly, children tend to be the innocent victims of a marriage gone bad. So they need to be financially protected. And that’s what life insurance does best. It turns pennies into dollars when your loved ones need it the most.
What if the family doesn’t have life insurance?
If the family didn’t already own life insurance, the judge in the divorce proceeding could mandate that one spouse purchase coverage, making the other spouse the beneficiary. Purchasing a basic 20-year term life policy might be the most economical way to accomplish that task. Term life insurance is relatively inexpensive, since the policy only provides coverage for a set period of time. The policy’s death benefit can be used to provide child support, protect alimony income, or put away money for college.
How much life insurance should I get to take care of my children?
If you’re looking for a ball park figure on how much life insurance to buy, some experts suggest taking the age of the youngest child, calculate how many years it will be until he or she reaches 21 years of age, then multiply that number by your annual salary. That monetary total is ideally how much your policy’s death benefit should deliver in cold hard cash. Again, every situation is different, so ask your life insurance representative about this issue before purchasing your policy.
What happens if you don’t trust your spouse to keep the policy in force?
If your relationship with your ex is not on excellent terms, and you worry that he or she might not faithfully continue to pay the premiums on the policy (failure to do so renders the policy null and void), then it might make sense take over policy premium payments yourself. As the payer of the policy, you also have control over who is designated to be the beneficiary of life insurance’s death benefit.
Before you sign on the dotted line…
Remember, your divorce agreement is a legally binding document. So what both parties agree to in that document will be in place for quite some time. According to the Insurance Information Institute, here are a few common-sense items that you should look for on that life policy before you sign your divorce agreement:
• Read the document thoroughly
• Determine coverage length
• Which spouse is paying the premiums?
• Who is the policy’s beneficiaries?
• The amount of coverage needed
Who should be the beneficiary of the policy?
In the case of most married couples, the policy holder’s spouse is typically named as the beneficiary of the policy. But once that couple gets divorced, sometimes the policy’s beneficiary is changed, so the children receive the policy’s death benefit instead of the spouse. If the children are still minors, an adult custodian may be assigned to represent the children’s interests, in a worst-case scenario.
As far as your ex-spouse goes, if you had a life policy while you were still married, you’ll probably have to designate your ex (or your kids) as the beneficiary, to satisfy the terms of your divorce.
But as this recent news story illustrates, if you do get married again, it might be a good idea to make sure that your new spouse is fully informed of this decision. Failure to do so can sometimes have tragic consequences. Here’s one example: a Cleveland woman currently faces life in prison without the possibility of parole for the November 2013 murder of her husband. The couple had only been married for a few months, when the wife allegedly paid someone to kill her husband for the $100,000 death benefit of his life insurance. It was only after the deed was done that she discovered that her name was not listed anywhere on the policy. To her shock, his ex-wife’s name was still listed as the beneficiary. The husband apparently had not yet gotten around to updating his policy information. His ex-wife received the death benefit instead.
This is an extreme case, of course. But making adjustments to your policy’s beneficiary after your divorce is an important task that shouldn’t be overlooked or postponed. Look, going through divorce is certainly not easy. But updating your life insurance’s beneficiary is relatively painless. And it’s one of the important things you can do for your family…present and future.
For more information on life insurance, talk to AccuQuote. We can provide quality, competitive life insurance quotes from the top-rated, brand-name insurance companies you know and trust.