How Life Insurance Can be A Guarantee In Your Divorce Settlement

By Gerald A. Maggio, Esq.

orange county divorce mediators; California Divorce MediatorsIf you are going through a contentious divorce process, then be sure to build in all the safeties you can to secure your hard-won settlement. Here’s how life insurance could hold the key to some of your concerns around the divorce settlement and your financial future.

Why you need a fail-safe guarantee

For someone who is a dependent spouse, relying on the alimony payment from a now-estranged spouse can be a nerve racking experience. This is made even more daunting when old age creeps up on you, or if your ex has a host of health problems or lives on the edge. Even without all these risks, the loss of your estranged ex will mean that your alimony payments stop completely with no one to make them. Often, after a divorce, couples will revise their wills to exclude the ex from inheriting their estate – whether it is property or other assets. There is however, one way to ensure you don’t find yourself in a spot when a spouse passes on.

Life insurance and how it can help

If you do not earn an income, and are totally dependent on the money that comes in as alimony, you may find yourself with no money in the bank when your ex dies. Life insurance can help give you a payout on their passing which will see you through.

Term insurance vs. whole life policy

A term policy covers the life of the insured individual – your ex – for a fixed duration of years. If your divorce settlement agreement dictates that payments will be made as child support until the kids are of a certain age, then it makes sense to have a term policy that runs for that duration only so you pay lower premiums. A whole life policy also has an investment component with some returns on the premium paid besides the death benefit.

Who pays?

Many couples have life insurance policies when they are married, but after divorce the earning spouse may choose to stop making these payments. If they were the holder of the policy, they could even change the beneficiary. It is therefore important, as a dependent to be the holder of the policy and to ensure payments are made. You could work out so that premium payments are made by your spouse even if you are the holder, but in many cases the earning partner may not agree, especially if they are to make alimony payments. In such cases, it is well worth cutting the premium out of your own alimony received to keep up a policy or to take out a new life insurance policy on them. Think of it as an investment in your own future and financial security.

To learn more about the divorce process in California and how mediation can help, please visit our page, What is Divorce Mediation.