Divorce and also Life Insurance Coverage
Divorce has a great impact on your life. It is bad both emotionally and from a legal and financial point of view. If you and spouse have purchased a life insurance policy together, the policy will be affected by the divorce.
An insurance plan can be considered communal property only when you have bought it with your partner and you have paid for it from household funds. Moreover, term life insurance coverage is not considered at such. In the case of whole life policy, things are different as the policy builds cash value and a number of issues arise from this.
Even if not communal property, you should still need to make some changes to your policy. For instance, you may need to change the beneficiary. Finally, bear in mind that your state laws influence greatly what happens with your life insurance coverage in case of divorce.
Therefore, what exactly is the best way to approach the matter? If you have obtained the affordable life insurance quotes before marriage, you are the one in control and it doesn’t matter who paid premiums. You could choose to cancel the policy, yet it is better to keep it. Your partner and kids will still need the money in case of your death. In addition, your son or daughter is still a part of your family and you should protect his or her future no matter of how well you get along with your ex-spouse. Bear in mind though, that your kid can’t receive any money from the insurance policy until the age of 18. If you do not trust your ex-spouse you can decide to have the money deposited in a trust account.
In the case of a policy bought by both partners, things are a bit more complicated. Technically the policy doesn’t belong to any of the spouses as both of them have paid for it. In this case it is better to name the child as sole beneficiary. If, after the divorce you are the one who receives alimony, you can add a clause on the divorce settlement claiming that the policy beneficiary cannot be changed without your consent.
A divorce is certainly rough on everybody. As I have already said, the state laws can determine how the court handles the life coverage. Yet it is better to settle things separately. After all, both of you have the mutual interest of securing your child’s future and education. If you do not have a child, you can both agree to cancel the insurance policy.
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