Buying life insurance on your Ex.
Putting aside any jokes one might have about applying for a life insurance policy on an ex-husband or ex-wife, the reality of the situation is that having such a policy is necessary to protect their financial futures for a lot of individuals.
During most divorce procedures, much of the negotiations that are going to occur are going to 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 one should consider when purchasing a life insurance policy on their ex-husband or ex-spouse that they can be sure that everything is done right!
Questions that will be address in this article will include:
- What is “insurable interest” and how is it determined?
- What type of “consent” will I need to obtain to purchase a life insurance policy on my ex-spouse?
- What type of life insurance policies can someone purchase on an ex-spouse?
- What steps should I take to ensure that I remain in control of the new life insurance policy purchased on my ex-spouse?
So, without further ado, let’s diver 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 that is 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 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 their financial well-being may be impacted by the death of that person. 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 allimony 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 life of the insured person. 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…
Run 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 allimony or any child support payments). In cases like these, it may be difficult to establish that an individual truly does have an insurable interest on the other, and in cases like these, it’s also usually difficult to get the proposed insured to “consent” to a policy being taken out on him or her as well.
What type of “consent” 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).
Which 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 that 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 wanting to purchase a life insurance policy on your ex-spouse, and to consider whether there are other options available to you for meeting 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 type of life insurance policy on an ex-spouse, provided that the ex-spouse consents to the policy and the insurer is willing to issue the policy.
There are several types of life insurance policies 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 of time, typically 10, 20, or 30 years. It is generally the most affordable type of life insurance, but it does not accumulate cash value and the coverage ends when the term expires.
Whole life insurance provides coverage for the policyholder’s entire life and accumulates cash value over time. It is generally more expensive than term life insurance, but it provides lifelong protection.
Universal life insurance is a flexible type of policy that combines elements of term and whole life insurance. It provides coverage for the policyholder’s entire life and also accumulates cash value, but the premiums and death benefits can be adjusted over time to meet the policyholder’s changing needs and circumstances.
It’s important to carefully consider your needs and goals when selecting a life insurance policy, and to 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 determine the best coverage for your specific needs and circumstances.
What steps should I take to ensure that I remain in control of the new life insurance policy purchased on my ex-spouse?
From there, it’s important to be sure that if and when you can purchase a life insurance policy on your EX that 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 make sure that payments are always made on a timely basis so that the policy doesn’t lapse.
- Second, they and they alone will have control over who is the beneficiary of the life insurance policy.
If you are not the “owner” of a policy, and you’re simply the person paying the bills, this does NOT AUTOMATICALLY mean that you are in complete control of the policy. This means that it’s quite possible that the INSURED could decide to change the beneficiary of the life insurance policy 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 still not as good as actually being the owner yourself because as owner, you would not only have this right, you would also be in complete charge of the entire policy as well.
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 would recommend that you do your homework first, only work with a true-life insurance professional and have everything you need in order prior to reaching out to your EX.
Once you do get your EX’s consent, he or she will be able to quickly and easily apply 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 in making everyone happy!
So, if you’re ready to get the process started and are interested in see what your options my be, just give us a call!