Divorce Impact on Life Insurance Needs

It’s important to consider your life insurance needs prior to the divorce so that you can include appropriate provisions into your settlement.

If you pass while married, in most states, the property passes to the spouse who then presumably passes property along to their children.  Divorce makes these decisions and inheritance paths more complicated and requires more thought and planning.  Consider the following.

  • A good practice is to have the divorce agreement specify the amount of insurance coverage your ex-spouse is required to maintain especially if they are paying child support or alimony.  Should something happen to your ex-spouse, the insurance proceeds could be used to continue paying child support for your dependents or alimony to you.
  • If you are the owner of a non-employer sponsored life insurance policy, you will want to change the beneficiary designation and allocations.
  • If you are the owner of a policy where the insured is your ex-spouse, you should transfer ownership to your ex-spouse.  It is up to your ex-spouse to change the beneficiaries on the insurance policies he/she is provided with or owns.  You are not responsible for paying the premiums on policies that he/she owns unless directed through your divorce settlement.
  • If you become the primary financial supporter of your dependents following the divorce, you will need to consider whether the amount of coverage you have in place is now adequate.  You may want to increase the amount of insurance you are carrying – understand that there is an associated cost of increasing your insurance.  That cost could impact your settlement terms.

In a future article we will address other insurance needs post-divorce, and the impact of the divorce on beneficiary decisions.

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