Among the many life changes that come with divorce, life insurance should be a priority, no matter what. If your divorce involves children, making the right decisions about life insurance is paramount.
Understanding and reviewing your policy is essential in a divorce. Discuss this with your insurance agent and your attorney before you have the conversation with your spouse. They can help inform you about a wide range of possibilities.
Life Insurance Change Options During Divorce
Keep the Policy You Have
This may sound counterintuitive, but if you have children as your beneficiaries, keeping the same policy in place may be the right fit.
This option may be beneficial if you trust your child to make the premium payments regularly. Or, you could continue to take on the financial responsibility or even split the payments.
You could also discuss the possibility of the parent providing child support, maintaining a policy in an amount that would ensure the children’s financial needs are taken care of.
Change the Beneficiary
Changing the beneficiary is a common move in the case of a divorce, but get your facts straight first. Contact your insurer and ask about the process of changing the beneficiary. Depending on your situation, this usually means simply requesting and filling out the right form. If your case is more complicated, your insurance agent or attorney can help direct you to other next steps.
Cancel the Policy
Although this may be the easiest solution, as it allows both spouses to start over and purchase a new policy, they should first consider that the cost may be significantly higher if their original policy was purchased when they were much younger and in better health. Talk to your agent before canceling any policy!
Split the Cash Value of the Policy
Replace Current Policy Type With a Different One
Taking into account what your specific situation is, a whole life policy may be replaced with a term policy because coverage only needs to be in place until the children reach the specified age of either 18 or 21.
Court Decisions Rule
Of course, decisions about handling financial responsibilities in a divorce are often made by the courts, so prepare yourself. Here are some important points to keep in mind.
- As part of the divorce settlement, one spouse or the other may be required to carry a whole or term life insurance policy to make sure child support and alimony payments will be made for a specified amount of time.
- A settlement agreement may also include stipulations to be put into place in the event that one spouse or the other remarries.
- Keep in mind that life insurance payouts can be refused if the policyholder dies under certain circumstances such as suicide, fraud, participation in illegal activities, and other scenarios.
Review Your Life Insurance Policy with Farm Bureau Insurance
At Farm Bureau insurance, we’re experts at reviewing and amending your life insurance policies. For more information about our services, contact a local agent near you. Start by using our Agent Finder.