Life Insurance & Divorce

    FAQs About Beneficiary Changes And Financial Support

    A divorce can be an emotionally taxing and frustrating process. However, it is during this turbulent period that you need to settle your finances and marital assets. You'll also need to think about alimony and child support, any remaining home mortgage payments, and what to do with your insurance. 

    After your divorce, you may need to change beneficiaries, settle any cash value in your divorce proceedings, and plan for your children's financial protection. If you have questions about life insurance and divorce, this guide is for you!

    Can Your Life Insurance Be Considered An Asset?

    Yes. An asset is something that can be used to create monetary gains, such as retirement accounts or stocks. While a permanent life insurance policy itself isn't deemed an asset in divorce cases, the cash value is considered a financial asset and can be included in a divorce settlement.

    Term life insurance doesn't have a cash value. It only pays out a tax-free death benefit and doesn't have a financial value while you're still alive. So if you have a term policy, you don't have to worry about it being considered an asset during the divorce process.

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    Can You Ask For Life Insurance In Divorce Settlements?

    Yes. It's a great way to get your ex-partner to meet their financial obligations to you and your children, especially if you depend on them for support. Life insurance can protect the alimony payments or child support payments you'll receive, as well as any pension or life retirement funds.

    If you want to manage their life insurance policy directly, you can simply remain the policy owner while listing your ex-spouse as the insured – just make sure they take a medical exam. Since you’re the one paying premiums, staying on as the policyholder ensures that there won't be a policy lapse or missed payments.

    FAQs: Changing Life Insurance Beneficiary After A Divorce

    Ending your marriage won't automatically change or invalidate your policy. If you or your ex-spouse want to change the beneficiary or make other adjustments to your life insurance policies, you need to talk to your life insurance company.

    Here are some common questions about making changes to insurance beneficiaries when your marriage ends.

    Can I remove my former spouse from my policy without their consent?

    It depends if they were listed as an irrevocable or revocable beneficiary in your whole or term life insurance policy. If you've listed them as irrevocable, they can't be removed from the policy without their consent.

    Revocable beneficiaries can be removed or changed without their consent. However, there are cases where even a revocable beneficiary can’t be removed due to a divorce agreement or divorce court’s orders. 

    Can you stay on your ex-spouse's life insurance policy?

    Yes. If your ex-spouse has an insurance policy that insures you and pays a death benefit to them when you die, they can keep that policy after your divorce. Only the policy owner can change or cancel it. You can ask them to change beneficiaries, but this is entirely up to them. 

    They can even make changes to the policy without your consent. Unless you take over ownership of the policy and its benefits as part of your divorce agreement, you can't make these changes yourself.

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    Can you remove ex-spouses as life insurance beneficiaries?

    Yes. If you own whole life or term life insurance, you can update your policy to remove your ex as a beneficiary. However, if you owe your former spouse for alimony or child support, the judge may require you to keep your former spouse as a beneficiary. This ensures that even when you're gone, they will continue to receive financial support.

    Can you name your child as an insurance beneficiary?

    Yes. However, this may not be a good idea depending on your state laws over insurance beneficiaries and the age of the majority.

    In some states, insurers can't pay the death benefit to a beneficiary who is still a minor. If you die and your beneficiary is under the age of majority, courts can appoint a person as a legal guardian to manage the funds. This can keep the benefit tangled in court proceedings for years.

    If you have children under the age of majority and you want them to be your beneficiary, here are two ways you can protect the life insurance policy's benefit for their use:

    Allow your ex-wife or husband to remain a beneficiary

    If your soon-to-be-ex-spouse is already a beneficiary, it can be more convenient for everyone to just keep them in the policy. This is the best situation for couples sharing custody and financial support for their children.

    Appoint someone as custodian of the insurance funds

    Talk to insurance companies about whom a policy owner can legally appoint to be a custodian. This is ideally someone you can trust to manage the funds in your children's best interests. If this person is someone apart from the surviving parent, it needs to be specified in the insurance policy.

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    Court-Ordered Life Insurance Coverage

    Apart from alimony and child support obligations, judges may need you or your spouse to get life insurance to fulfill spousal support obligations. Known as court-ordered life insurance, this typically has to be secured within a specific timeframe.

    If you're legally required to buy insurance because of your divorce proceedings, here are three things you need to remember.

    Start The Application Process Immediately

    A general rule is to start applying for life insurance at least six months ahead of time to prepare for any possible delays. The average application takes four to six weeks from application to approval. It can take even longer if the insurance company rejects your initial application or asks for additional information, such as an attending physician's statement.

    If you're healthy enough to qualify for accelerated underwriting, take advantage of it to get coverage as soon as possible and meet the court deadline.

    Get Proof Of Your Coverage

    The court may ask you to provide proof of insurance. Get a copy of your signed policy application from your life insurance company or life insurance agent. You may also be able to present your receipt of payment as proof.

    Court guidelines vary on a case-to-case basis. Talk to your divorce attorney to make sure that you're presenting sufficient proof for your proceedings.

    Maintain Open Communication From The Start

    If you have a court-mandated life insurance policy, coordinate with your divorce attorney and your former spouse. Be clear about policy ownership, premium payments, coverage, and the duration of the life policy.

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    Getting Life Insurance After A Divorce

    If you're buying life insurance after your divorce, make sure you’re getting enough coverage to protect your loved ones after your death. Here are some things you need to consider when getting a policy.

    Income Replacement

    The face amount should be enough to cover your share of the household expenses. This allows your family to maintain their standard of living long after you’re gone. 

    Your Dependents

    Caring for children and aging family members can be expensive, especially when you factor in college tuition and medical costs. Factor in those potential expenses when deciding on your coverage amount.

    End-Of-Life Costs

    Funeral costs and bills for medical care are a large financial burden for the loved ones you leave behind. Having insurance can help your family pay for these costs without having to dip into their savings or take out loans.

    Types Of Policies You Can Get As Part Of A Divorce Decree

    Apart from the amount of coverage, you need to consider the type of insurance you'll be getting. 

    Term policies are more affordable. Although they have limited terms and coverage, they’re usually sufficient to secure your home mortgage and college tuition for your children.

    Permanent whole life policies, however, have the benefit of a lifelong term and added cash value. Some policies even allow you to get additional profit from investments, such as universal life insurance. 

    Talk to your agent to determine which kind best suits your needs before you decide what type to buy.

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    Conclusion

    A life insurance policy can go a long way in securing alimony and/or child support after a divorce. If you need help with life insurance policies for your divorce settlement, talk to a financial expert!

    Wesley Insurance, LLC can help you find the best types of life insurance policies for married and divorcing couples. We can also advise you on how best to change your policy as part of the divorce proceedings. Contact us for more information!

    Written By Cameron McDowell
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