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Insurance Considerations in a Divorce

Updated: Jun 9


Divorce is a challenging, emotional process that requires careful consideration of many important matters. Two areas that are often overlooked are Life and Disability Insurance, which can provide financial security for both parties involved… as well as their children. So, if you’re going through a divorce, here’s what you need to know about Life and Disability Insurance!


If you purchased coverage during your marriage, there are two key matters to examine:

  1. Review the beneficiaries and owners of your policies. Ensure that you’re the owner, which gives you the ability to change the beneficiaries. Speaking of which, your ex is likely the beneficiary. Unless you still want him or her to receive the death benefits, you need to request a beneficiary change. This does not happen automatically.

    1. Side note: If you have children who are minors, please do not designate them as your new beneficiaries. Minors cannot legally accept a death benefit. So, to ensure that your children receive the proceeds, you can either (i) arrange for a custodian to control the funds or (ii) set up a trust.

  2. Your Life Insurance policy may have a cash value that accumulates with interest or a rate of return. The funds can be withdrawn or taken as a loan to be used for emergencies, a down payment on a home, or college tuition. In short, the cash value is effectively a savings account and thus can be considered a marital asset to be split in divorce settlements.

Even if you have coverage already, there are two key reasons for purchasing additional Life and Disability Insurance:

  1. If your ex is required to pay you alimony and/or child support, I recommend that you ask him or her to purchase coverage as part of your divorce agreement and name you as the beneficiary. This way, if an unexpected death, injury, or illness occurs to your ex, you’ll continue to receive the alimony and/or child support in the form of insurance proceeds.

    1. Side note: If you don’t trust your ex financially, you may want to own the policy and pay the premiums yourself.

  2. If you have primary custody of your children, you need to have sufficient coverage yourself to ensure your kids have the financial means to maintain their quality of life and pursue their dreams.

    1. Side note: For Life Insurance, you can estimate the minimum death benefit you need by (i) determining the number of years until your youngest child turns 18 and (ii) multiplying it by your annual income. For Disability Insurance, you can estimate the minimum benefit amount by adding monthly expenses like your mortgage, utilities, groceries, and child care.

I get it: Most people don’t want to think about insurance. However, it is a necessary evil as I jokingly say, and there are specific matters to consider when going through a divorce. So, I hope you found these tips helpful. If you want to discuss your insurance situation in depth and privately, my email address is insuritystreet@gmail.com. The consultation is free with no obligations.

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