Getting a life insurance policy protects those closest to you from financial devastation if you pass away and your income is lost.
But, if you happen to go through a divorce, life insurance is often overlooked when divvying up assets – and should not be. Life Insurance should be an important part of the divorce process, especially if children are involved. Keeping life insurance in order helps to protect the financial interests of both parties and their dependent children.
Below are some things to consider to ensure your existing life insurance policy continues to meet your needs and that your children are financially protected in the event of a divorce.
Usually, most married people with life insurance list their spouse as the primary beneficiary to ensure they can keep paying the mortgage or rent, put food on the table, and raise the children if they have any.
In the case of a divorce, particularly one with bitterness and anger, there is a good chance you will no longer want your ex-spouse to be profiting from your death. Fortunately, most life insurance policies are revocable, which means the policy owner can change the beneficiary at any time.
It is important to update your life insurance policy account if the beneficiary and policy owner’s marital status changes. You may want to rename the beneficiaries from your ex-spouse to your children, but if your children are minors, you may need to appoint an adult custodian to receive and manage the benefits on behalf of your children until they’re grown. If no children are involved, you may want to redesignate the beneficiary to other relatives.
At the time of writing, the state of Louisiana doesn’t have the “revocation-upon-divorce” law to automatically remove your ex-spouse from the life insurance beneficiary following a divorce, so you need to make sure to contact your insurance company to update the beneficiary as soon as possible.
Asset or cash value
While term life insurance is often considered a separate asset, the cash value in a permanent policy may be considered joint. This cash value is considered your net worth as a married couple. Some policies may allow the policy to be canceled and the cash value to be divided equally between you and your ex-spouse. If a cash value is involved, it’s best to consult with your insurance agent to see your options.
Alimony and child support
Since child support from the noncustodial parent is supposed to go towards feeding, clothing, and other expenses for the children, it is important to protect the primary custodial parent so that no income is lost if the noncustodial parent loses their job or passes away. It would be wise to consider maintaining a policy on your ex with a benefit amount high enough to replace alimony or child support until the last child is grown, at a minimum.
Usually, the court will require the noncustodial parent to have a life insurance policy in place. If they don’t have any, they will need to purchase one to make sure that the children are provided for, and the ex-spouse is compensated.
One of the challenges of divorce is becoming a single parent and finding out you cannot rely on your ex-spouse, financially or otherwise. You need to put a plan in place and take out an adequate life insurance policy on yourself to protect your children or other dependents if you are no longer around since, in most cases, they depend solely on you for financial support.
Finalizing a divorce can be complicated and lengthy, but life insurance should be a serious consideration in the process. Knowing if your policy is a marital asset, who the beneficiaries are, and if owning a policy should be part of your agreement will ensure your loved one has the financial support they deserve when you are gone.
The type of life insurance that is best for you will depend on why you need coverage. Plus, your individual circumstance will dictate what kind of policy you will buy. Our insurance agents at TSL Insurance Group can review your existing life insurance policy to ensure you and your children, if any, are protected.
Our team will ensure that you have the best coverage, and we will find one that meets your needs and budget. If you have any questions about life insurance in Lafayette, Baton Rouge, Abbeville, Lutcher, and Franklin, LA, fill out the form below, and one of our dependable and dedicated agents will contact you within one business day. Leave your insurance coverage to TSL because your security is our priority, not an option.