A divorce is something that generates a lot of stress. After spending so much time trying to bond with your spouse and family, you need to start separating everything from household items to finances. One thing you may not have thought about is your life insurance policy or policies. What needs to change, and how do you proceed from here? Here are some options you might want to consider when reviewing your life insurance policy after divorce.
1. The courts may order you to have a life insurance policy
Sometimes the courts may require that at least one of you (you or your spouse) have a life insurance policy. They want to ensure that there is a supplementary fund to support the child or children in case something was to happen to either parent. 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, this will need to be done with prior approval. If you have any questions regarding court-ordered life insurance policies, meet with your licensed life insurance agent and with his lawyer. You must always follow the indications and requirements dictated by the court.
2. Reconsider your beneficiaries
Many (if not most) married people choose their spouse as the beneficiary. After a divorce, you may consider changing your beneficiary. In many states, a divorce may prohibit an insurance company from paying life insurance benefits to a former 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. The challenge comes when deciding who the new beneficiary will be. If you have minor children, you should think very carefully about naming them as your beneficiary because an insurance company usually cannot release funds to a minor. For guidance on choosing the best candidate to be entrusted with this responsibility, talk to your licensed insurance agent or attorney.
3. Record your life insurance policy as an asset to be divided
Universal life insurance policies and permanent life insurance policies may have a cash value. You’ll want to make sure you don’t lose any of your cash value or net worth. Recording it as an asset to divide will help you come to an agreement on how to divide the policy.
Some policies may award the cash value to one spouse, keeping the policy and coverage in the other spouse’s name. It’s important to know that doing this will take away the cash value of the death benefit. Again, a licensed life insurance agent can help you better understand your post-divorce options.
A lot happens after a divorce, and there’s a lot to do to get your life back on track. Be sure to cross life insurance off your list. You want to ensure the best situation for you and your children after going through these difficult times. For more details and information, your licensed life insurance agent can help you organize your life insurance affairs.