Divorce and Insurance: A Basic Primer
As a veteran insurance broker with almost thirty years’ experience, one maxim has always rung true: KNOWLEDGE IS POWER. It has always been my goal to bring the best available resources, tools and information to bear so that my clients can make choices and feel secure that well-informed decisions are being made. I have seen many clients and friends get married over the years, and wish them a long happy life together. For many, it doesn’t end that way. Relationships and marriages don’t last and couples move toward separation and divorce.
The process can be emotionally overwhelming, scary even. Most of the fear is related to the idea of being alone, and of facing a future without the security that being a couple can bring. This fear also comes from the sudden awareness that you might not have a solid understanding of your family’s finances, or of your own for that matter. The recognition that your marriage is ending can be a crisis. A time like this is made even more fraught with the realization that you have no idea what you need financially over the short and long-term, and what is already in place. It has been my experience that time and time again that people become immobilized with fear when they don’t have the information they need to ensure that their financial “house” is in order.
Unfortunately, fear can potentially effect your decision making because you get bullied or pressured by your ex-husband, wife or partner, opposing attorneys/mediators, etc. Or you end up making poor decisions about finances because you don’t have the relevant facts. If you rely solely on professionals without having your own idea about what you need (amount of income, child support, etc.) how can they be expected to get it right? It’s not helpful or useful when an attorney says,” Don’t worry about it, I have this.” You must be part of the process.
Understanding the role insurance plays in a divorce is vital to ensuring financial security and success. Knowing that just because the agreement has been drawn up, the numbers are all accurate and it seems that all parties are adequately provided for, doesn’t mean all your work is done.
You are counting on your ex honoring the agreement. You need them to do so for you to sustain your current lifestyle and obligations – but, for example, what if they suddenly were unable to do so because they die? And what about your contribution specified in the agreement? Are you mandated to contribute to support of the family – what if something unexpected happens to you? What happens to retirement and/or education needs if the person who was required to put the funds away is no longer living?
The primary answer to these concerns, is life insurance. Life insurance will protect all parties in the event an unexpected or untimely death occurs. The pieces of the puzzle of How much life insurance? How long do you need the coverage? Who pays the premiums? Who is the beneficiary? Who owns the policy and why? can be answered if you have the basic tools with which to gain an understanding of this underlooked financial tool.
Below is an infographic briefly outlining the process and answering some basic questions regarding divorce and life insurance. The content should be examined at some point while the divorce or separation agreement is being drafted. Considerations of cost, availability of coverage, etc. should be part of any discussion pertaining to the final divorce agreement. While coming to terms with your ex-husband, wife or partner regarding finances is one thing, ensuring that the terms are actually carried out is another. Consider covering all your bases by purchasing life insurance protection.
