Life Insurance Options When a Marriage Ends

When the unforeseeable occurs and a couple divorces, there are many things to consider.

Life insurance may not be front of mind in such situations – but it’s an important consideration.

When negotiating a divorce settlement, it is important to specify who will own any life insurance policies you have as a couple.

Beneficiaries

Whoever owns the policy has the right to name the beneficiaries.

Typically, the custodial parent is named the owner of the policy.

How long the life-insurance policy is maintained depends on the goal of the policy.

Provisions

Most divorces will include provisions for child support or alimony, in which case it is common to include a stipulation that the supporting spouse should carry a life insurance policy so that the supported spouse and/or children will be provided for should the supporting spouse die.

Intentions

If the policy was intended to provide child support if the supporting spouse dies, it can be terminated when the child reaches the age of majority.

If the policy was intended to provide alimony in the event the supporting spouse dies, it may continue as long as the alimony payments are required.

However, it is possible to include provisions in your divorce settlement agreement that if the life insurance policy is allowed to lapse or if the beneficiary designation is changed, the supported spouse and/or children are entitled to part of the supporting spouse’s estate equal in value to the death benefit if he or she dies.

Other Issues

A number of other issues can arise concerning divorce and life insurance policies.

Therefore, it is always important to discuss your personal situation and goals with your attorney and financial advisor.