Something to consider after a divorce is whether or not you and your children will be protected in the event of the death of your ex-spouse.
If it easy to not think about these types of things but the fact of the matter is that they are important things to think about.
Failing to plan for the future can cause for more problems down the road that could have been prevented.
The best course of action is to plan for these types of things when you are still going through the process of divorce but the fact of the matter is it is never too late to figure our the details of life insurance after death.
Life Insurance Divorce Settlements
Life insurance is one of the least covered topics during a divorce settlement. This is most likely the case because many people do not consider low cost life insurance to be the important financial tool that is actually is. Not only does life insurance help to mitigate and manage risk but it is also used as a tool to build wealth. Knowing this information during a divorce can put you in an advantageous position after settlement.
When it comes to life insurance being used to manage risk there are a couple of different types of insurance that can be considered. Alimony and mortgages are just two obligations that usually come out of a settlement that need to be protected in the event unexpected death or disability. Both life insurance as well as disability insurance are there to help cover you in these events.
Check Your Beneficiaries
The person who will be receiving the money from a claim will want to make sure that they are both the owner and the beneficiary that is named in the policy. This is where negotiating during a settlement comes in handy. You will want to make sure that the premium payments are negotiated and the person responsible for paying them is outlined in the settlement process.
It is important to be very clear about who is responsible for what during this process and spell it out in clear and distinct writing. It may be a long and awkward process but it will most likely save you time and money in the long run. Knowledge and research are the best ways to protect yourself during these times.
A life insurance policy is a great addition to a personal finance strategy as a tool for wealth accumulation. During a divorce, if there is already a life insurance policy is one of the spouses names it should not be overlooked as an item to be split in the settlement of the divorce. There is also the option of buying out the policy. If you chose to keep the policy intact, it will be in your best interest to be placed in control of the premium payments as well as be name the beneficiary.
What if You Need Life Insurance Fast?
If you don’t currently have life insurance in force and your divorce decree requires you to purchase life insurance, you might be up against some time restrictions. Traditional term policies will take up to 4-6 weeks to get approved and sometimes longer. For many, this timeline won’t work.
So what are your options if you need instant life insurance? Introducing life insurance without a medical exam.
By avoiding the medical exam, you can have life insurance in-force between 48 hours up to 10 business days depending on the carriers. Check out our post for a comprehensive review on the no physical exam life insurance companies.
These policies are an excellent way to get life insurance coverage fast. If you have severe health complications or several pre-existing conditions, they are a perfect way to get life insurance that you wouldn’t be able to be approved for otherwise.
But these policies do come with some pitfalls that you should know about. The first is that a no-exam policy is going to be more expensive than a policy that requires you to go through a health exam beforehand. Because the insurance company doesn’t get a clear picture of your health, which means they are taking more of a risk. To offset the risk, they are going to charge you more every month for the coverage.
Additionally, the coverage limits are going to be much lower than with a medically underwritten plan. Each company with no exam plans have different limits, but they are normally under $400,000 and some are much lower than that. For a lot of applicants, this isn’t enough coverage. Having a large enough insurance plan is vital for the protection of your loved ones. You will need to shop the market for the best life insurance companies for the best quotes.
Don’t Forget the Kids
The last consideration that should be made is in the event that there are children involved. In the event that something happens to you, you want to know that your children will be well taken care of financially. Reevaluating your insurance coverage is a great way to determine if you have enough coverage to protect your family.
Deciding how much Life Insurance you need
Because you’re going through a divorce, your life insurance needs might be changing. Now that you probably won’t have a spouse that relies on your salary, you will need less insurance coverage. Additionally, you may no longer be responsible for paying the mortgage payments, which means even less of a need for life insurance. It’s vital that you have the right amount of insurance, you don’t want to pay for too much, but not having enough can leave you family in a tight place.
The first thing that you need to account for is any debt that your loved ones be left with. The primary goal of your policy is to pay off those debts if you were to pass away. Make sure that your insurance coverage can pay off all of those expenses and any other final expenses that you would leave behind.
Additionally, you’ll need to account for your annual income. The other purpose of your coverage is to replace your income for anyone that relies on the paycheck. If you were to pass away, your family would struggle financially if they no longer had that money.
If you have any questions about when should you get life insurance coverage, or about your insurance policy while you’re going through a divorce, please contact us today. It can be a difficult season of your life, but life insurance is one of the most important investments for the protection of your loved ones. We can help you ensure that you have the insurance coverage that your family would need and that nothing will go amiss through the divorce process. If you don’t have life insurance, please don’t wait any longer to get a policy. You never know what’s going to happen tomorrow.