Putting aside any jokes one might have about applying for a life insurance policy on an ex-husband or ex-wife, the reality is that having such a policy is necessary to protect their financial futures for many individuals. After all, during most divorce procedures, much of the negotiations that occur will center around alimony and child support payments. All of which would likely disappear if the one responsible for such payments passed away prematurely!
This is why…
We wanted to take a moment to discuss some of the most important considerations when purchasing a life insurance policy for their ex-husband or ex-spouse so they can be sure everything is done right!
Questions addressed in this article will be addressed at “insurable interest” and how it is determined.
- What type of “consent” will I need to obtain to purchase a life insurance policy for my ex-spouse?
- What kind of life insurance policies can someone purchase on an ex-spouse?
- What steps should I take to remain in control of the new life insurance policy purchased from my ex-spouse?
So, without further ado, let’s dive right in!
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What is “insurable interest,” and how is it determined?
Insurable interest refers to a person’s financial stake in the continued life of another person. It is a legal concept used in the context of life insurance to determine whether a person is eligible to take out a policy on another person’s life.
In general, a person has an insurable interest in another person if the person would suffer financially if the other person were to die. For example, a spouse or child typically has an insurable interest in the life of their partner or parent, as the death of that person may impact their financial well-being. A business owner may also have an insurable interest in the life of a key employee, as the death of that employee could have a significant financial impact on the business (or an ex-spouse who provides income to another in the form of alimony or child support).
It’s important to note that life insurance policies can only be issued to individuals who have an insurable interest in the insured person’s life. This helps to ensure that life insurance is used as a financial planning tool rather than a means of profiting from another person’s death.
Where one might…
Running into trouble is when an individual is trying to purchase a life insurance policy on an ex where there doesn’t seem to be any financial connection with one another (think no alimony or any child support payments). In cases like these, it may be challenging to establish that an individual indeed has an insurable interest in the other, and in some cases, it’s a. Getting the proposed insured to “consent” to a policy being taken out on them is tricky.
What type of will I need to obtain to purchase a life insurance policy on my ex-spouse?
In general, you will need the consent of the person whose life you want to insure in order to purchase a life insurance policy on them. This is because the person whose life is being insured has the right to control who takes out a policy on their life and the terms of that policy (unless otherwise dictated by a judge).
This means that if you want to purchase a life insurance policy on your ex-spouse, you will likely need to obtain their consent to do so. This may involve obtaining their written consent, or you may be able to provide their verbal consent if the insurer is willing to accept it.
It’s important to note that…
Obtaining consent from the person whose life you want to insure is only one factor the insurer will consider when determining whether to issue a policy. The insurer will also consider other factors, such as the person’s age, health, and insurable interest.
It’s a good idea to carefully consider your reasons for purchasing a life insurance policy on your ex-spouse and whether other options are available to meet your financial planning needs. It may also be helpful to consult with a financial advisor or insurance agent to explore your options and determine the best course of action.
What type of life insurance policies can someone purchase on an ex-spouse?
It is generally possible to purchase any life insurance policy on an ex-spouse, provided that the ex-spouse consents to the policy and the insurer is willing to issue it.
Several types of life insurance policies are available, including term life insurance, whole life insurance, and universal life insurance. Each type of policy has its own features and benefits and may be suitable for different needs and circumstances.
Term life insurance provides coverage for a specific period, typically 10, 20, or 30 years. It is generally the most affordable type of life insurance but does not accumulate cash value, and the coverage ends when the term expires.
Whole life insurance covers the policyholder’s entire life and accumulates cash value over time. It is generally more expensive than term life insurance but provides lifelong protection.
Universal life insurance is a flexible type of policy that combines term and whole life insurance elements. It provides coverage for the policyholder’s entire life. Also, it accumulates cash value, but the premiums and death benefits can be adjusted over time to meet the policyholder’s changing needs and circumstances.
When selecting a life insurance policy, it’s important to carefully consider your needs and goals and compare the features and benefits of different policies to determine the best fit for you. It may also be helpful to consult with a financial advisor or insurance agent to explore your options and choose the best coverage for your specific needs and circumstances.
What steps should I take to remain in control of the new life insurance policy purchased from my ex-spouse?
From there, it’s essential to be sure that if and when you can purchase a life insurance policy on your EX, you do so in a way that you always maintain control over this new policy. This is why we usually recommend that the Ex-spouse who is looking to purchase a life insurance policy on an EX always be the OWNER and PAYOR of the policy so that they can be sure of two things:
- First, they can ensure that payments are always made on time so the policy doesn’t lapse.
- Second, they and they alone will have control over who the beneficiary of the life insurance policy is.
If you are not the “owner” of a policy and are simply the person paying the bills, this does NOT AUTOMATICALLY mean you are in complete control of the policy. This means that it’s entirely possible that the INSURED could decide to change the life insurance policy beneficiary without your knowledge, even though you are the one paying the bills!
In cases where one can not become the “owner” of the policy; one can still insist that they become an “irrevocable beneficiary” of the life insurance policy, which means that the owner of the policy would not be able to change who they would like to be the beneficiary of the policy without your consent.
“Which is good”
But it is still not as good as it was. The owner yourself because, as owner, you would not only have this right, but you would also be in complete charge of the entire policy.
Which brings us to…
The point where we like to remind folks that purchasing a life insurance policy is a “serious” matter and one that shouldn’t be rushed. This is why if you are considering purchasing a life insurance policy on your EX, we recommend doing your homework first, working only with a true-life insurance professional, and having everything you need in order before contacting your EX.
Once you get your EX’s consent, they can apply quickly and easily, and all of the “hassle” of applying will be taken care of. The good news is that we here at IBUSA have plenty of experience helping couples like yourself get this done and know that simplicity and affordability are key to making everyone happy!
So, if you’re ready to start the process and are interested in seeing your options, give us a call!