Life insurance is an important aspect of many divorce decrees and should not be overlooked. It is a way for divorcing couples to secure their financial future and protect themselves against unexpected events. In this article, we will explore why life insurance is so important in a divorce decree and how it can help ensure a smooth and stress-free settlement process.

Why life insurance policies are important during a divorce

First, life insurance can be used as a source of income for the spouse who is financially dependent. In the event of the death of the policyholder, the insurance policy will provide a lump sum of money that can be used to support the spouse and any children. This helps to ensure that the financially dependent spouse will be able to maintain their standard of living and avoid financial hardship.

Second, life insurance can also be used to secure alimony or child support payments. In some cases, the divorce decree may require one spouse to purchase a life insurance policy to secure their alimony or child support obligations. This way, if the policy holder were to die, the insurance policy would provide the necessary funds to continue to support the financially dependent spouse and children.

Third, life insurance can help to resolve any disputes related to property division. For example, if one spouse is awarded a portion of the other spouse’s retirement account, a life insurance policy can be used to secure the value of that account in the event of the policy holder’s death. This ensures that the surviving spouse will receive their fair share of the property division, even if the policy holder dies before the division is finalized.

In these ways, a life insurance policy can provide financial security and peace of mind for both spouses, which can often help resolve disputes related to property division, and ensures that the financially dependent spouse and children are protected in the event of the policyholder’s death. It can also go a long way toward easing any uncomfortable feelings between the two parties getting divorced which is always an added benefit as well.

Complications that can arise

Some of the common complications that arise when getting a life insurance policy during a divorce may include:

Cost:  The cost of a life insurance policy can be prohibitively expensive. Divorcing couples may have limited resources and budgets, making it difficult to afford a policy. This can lead to disagreements between the parties and make it difficult to reach a settlement.

Type of life insurance:  There can be disagreements over the type of life insurance policy that should be purchased. For example, one spouse may want a term policy while the other may prefer a permanent policy. This can lead to disagreements and slow down the divorce process.

Health: There may be issues with the policy holder’s health. If the policy holder has a pre-existing medical condition, it may make it difficult or impossible for them to obtain a life insurance policy. This can further complicate the divorce process and make it difficult to reach a settlement.

Proof of policy:  In some cases, one spouse may experience difficulties in proving that a life insurance policy exists. If a life insurance policy is purchased as part of a divorce settlement, it is important to ensure that it is properly documented and that both parties have access to the policy information.  Issues may also arise that ensure that the policy remains in force and that payments are made so that policy stays in force.

Finally, there may be disputes over the beneficiary of the life insurance policy. The divorce decree may specify that the policy should name the financially dependent spouse as the beneficiary, but if the policyholder fails to update the policy, the policy may not provide the intended financial protection.

Solutions to common complications

Cost:  A solution to this issue is to compare life insurance policies from different insurance providers and select the one that offers the best value for the money. Another option is to opt for a term life insurance policy, which is typically less expensive than a permanent policy.

Type of life insurance policy that should be purchased. A solution to this issue is to have a neutral third party, such as a financial advisor, assist with the selection of a policy. This way, both parties can have a say in the type of policy that is purchased, but the final decision will be made by an impartial expert.

Health. A solution to this issue is to purchase a policy as soon as possible before any health issues arise. It is also important to be transparent about any pre-existing medical conditions and to work with a life insurance provider that specializes in insuring individuals with health issues.  In cases where an individual may not be able to qualify for a  traditional life insurance policy, guaranteed issue life insurance policies and/or multiple guaranteed issue life insurance policies when affordable, may provide an acceptable solution.

Proof of coverage: There can be difficulties in proving that a life insurance policy exists. A solution to this issue is to keep accurate records of the policy and to ensure that both parties have access to the policy information. It is also important to have a copy of the policy stored in a safe place and to provide a copy to the divorce attorney.  Additional accommodations can be made whereby the beneficiary of the policy is the actual owner and payor of the insurance policy this way they will have complete control of the policy, instead of the insured.

Beneficiary issues:  Finally, there may be disputes over the beneficiary of the life insurance policy. A solution to this issue is to specify the beneficiary in the divorce decree and to ensure that they become an “irrevocable beneficiary” so that this can not change in the future.  In many cases, the irrevocable beneficiary may also choose to become the owner of the policy as well, to ensure they have complete control over the policy as well.

Working with an experienced divorce attorney and life insurance agent experienced with these types of policy requirements should make the process much easier and minimize any complications later in life.

Factors to consider when purchasing a life insurance policy for a divorce

When purchasing a life insurance policy in a divorce, the following factors should be considered:

1. Coverage amount: Decide on the amount of coverage that is appropriate to provide for the financial security of the children and/or the ex-spouse.
2. Beneficiary designation: Ensure that the designated beneficiary is still the intended recipient, as divorce may impact the original designation. Consider making the beneficiary irrevocable to prevent unintended changes.
3. Secondary beneficiary: Consider naming a secondary beneficiary in case the primary beneficiary predeceases the insured or is unable to receive the death benefit.
4. Policy owner: Determine who will own the policy and have control over it, as this can impact the death benefit and tax implications. This person will also be the one receiving direct communication about the policy while it is inforce.
5. Premium payor: Decide who will be responsible for paying the premiums on the policy, as this will impact the cost and the ability to keep the policy in force. At first, it may not seem attractive to be the one making payments on the policy, however, this will be the best way to ensure that the policy remains inforce.
6. Type of policy: Determine whether a term or permanent policy is most appropriate based on the specific needs and goals.
7. Premiums: Consider the cost of premiums and the ability to afford them, both now and in the future. A lapses policy due to lack of payment, will not provide you with the coverage you want and need.  This is why it’s important to choose a policy that all parties feel comfortable affording.
8. Divorce settlement: Review the divorce settlement agreement to determine if life insurance is required and, if so, the specific requirements.
9. Future changes: Anticipate any future changes in circumstances, such as remarriage, and adjust the policy accordingly.
10. Expert advice: Consider consulting a financial advisor or insurance agent to help navigate the options and make an informed decision.

Benefits of a No Medical Exam Life Insurance Policy for a Divorce Settlement

A no medical exam life insurance policy can be a convenient and efficient option for those who are in the process of divorce and is why we’ll usually consider these options first.  Benefits include:

1. Quick and easy: Unlike traditional life insurance policies that require a medical exam, no medical exam policies can be obtained quickly and easily, often in just a few days. This can be especially important for those who are in the midst of a divorce and need life insurance coverage in place as soon as possible.
2. Compliance with divorce settlement agreement: Many simplified issue life insurance policies will meet the minimum requirements most divorce settlement agreements, having a no-medical exam policy in place can help ensure compliance with the terms of the agreement. This can help prevent disputes and provide a clear understanding of the financial responsibilities of each party.
3. Convenient coverage: No medical exam policies can be obtained online or over the phone, making it easy to secure coverage from the comfort of your own home. This can be especially important for those who may have limited mobility or a busy schedule, or a disagreeable applicant.
4. Opting for a no-medical exam life insurance policy can also be a smart option for those who have not recently had a full physical. After all, it’s probably safe to say that most people don’t have stellar blood pressure values during the middle of their divorce.

The good news is that we here at IBUSA understand that purchasing a life insurance policy during a divorce can feel daunting and confusing which is why we’ll do everything in our power to make the process of getting you insured as easy as possible.  Our team of experts will take the time to understand your unique situation and help you find a life insurance policy that meets your specific needs and budget.

We believe that everyone deserves to have peace of mind and financial security, especially during a time of uncertainty. That’s why we’re committed to helping you make the right decisions for your future and providing you with the support you need as you navigate this difficult time. 

So when you’re ready to get started, just give us a call and let us show you want we can do for you!

Frequently Asked Questions

Why should I consider purchasing a life insurance policy during my divorce?

Purchasing a life insurance policy during a divorce can provide financial security for both parties in the event of the insured person’s death. The policy can serve as a source of funds for a former spouse, ensuring that the agreed-upon financial obligations, such as alimony or child support, are still met. Additionally, it can help protect the assets and financial future of the surviving spouse and their children.

Is life insurance required as part of a divorce settlement?

In some cases, yes. Life insurance may be required as part of a divorce settlement agreement when one spouse is ordered to provide financial support for the other. This offers a way to ensure that these obligations will be fulfilled, even in the event of the payer’s death.

Who is responsible for paying the life insurance premium during a divorce?

This will depend on the terms of the divorce settlement agreement. The responsible party is typically the spouse who is required to provide financial support in the event of the other’s death.

Can I purchase a life insurance policy after my divorce is finalized?

Yes, you can purchase a life insurance policy at any time. However, it may be more difficult to secure a policy after a divorce if you have developed any health issues since your separation. It’s recommended to consider purchasing a policy during the divorce process.

How do I choose the right life insurance policy during my divorce?

It’s important to consider your specific needs and budget when choosing a life insurance policy. You may want to consider working with an insurance agent who specializes in life insurance policies for divorce. They can help you find a policy that meets your specific needs and budget.

How long does it take to get a life insurance policy during a divorce?

The time it takes to get a life insurance policy during a divorce will depend on several factors, including the type of policy you choose, the insurance company you work with, and the process for getting a medical exam (if required). In general, it can take several weeks to several months to get a life insurance policy in place.