1. Courts may order you to have a life insurance policy
Sometimes courts may require at least one spouse to have a life insurance policy. They want to ensure there is a supplemental fund for child support in case something does happen to one of the spouses. If the spouse stops paying for life insurance, a court order can be filed to force compliance. If the ex-spouse tries to change policies or beneficiaries, it will have to be done with prior approval.1 If you have any questions regarding court ordered life insurance policies, sit down with your licensed life insurance agent and your attorney. You should always follow the directions and requirements mandated by the court.
2. Reconsider your beneficiaries
Many (if not most) married people choose their spouse to be their beneficiary. After divorce, you might consider changing your beneficiary. In many states a divorce will prohibit an insurance company from paying life insurance proceeds to an ex-spouse, unless required under your divorce decree. In order to change your beneficiaries, all you have to do is fill out a form and return it to your life insurance company.1 The challenge comes in deciding who that new beneficiary will be. If you have minor children, you should think carefully about naming them as your beneficiary since an insurance company typically cannot release funds to a minor. For advice on how to choose the best candidate to entrust with this responsibility, talk to your licensed insurance agent or attorney.
3. List life insurance policy(ies) as an asset to be divided
Universal life insurance policies and whole life insurances policies can hold cash value. You want to make sure you don’t lose out on any of your cash value or your net worth. Listing it as an asset to divide will help you reach an agreement on how to split the policy.
Some policies may give the cash value to one spouse, keeping the policy and coverage in the other spouse’s name. It’s important to know that doing so will take the cash value away from the death benefit.2 Again, a licensed life insurance agent can help you get a better grasp on your post-divorce options.
There’s a lot going on after a divorce and much to do to get your life settled back into place. Be sure to check life insurance off your list. You want to guarantee the best situation for you and your kids after this difficult time. For more details and information, your licensed life insurance agent will be able to help organize your insurance affairs.
Survivedivorce.com, Life Insurance and Divorce: A Complete Guide (May 21, 2020)
Masonfinance.com, Negotiating Life Insurance During a Divorce (May 21, 2020)
Categories: Insurance, Life Insurance