Life insurance in Divorce

Addressing Life Insurance in Divorce is a critically important topic. So let me begin by painting an ugly picture that you will want to avoid.

Cathy divorced Dick after 22 years. In the settlement, Dick agreed to pay Cathy spousal maintenance of $3,500 per month for the next 15 years. Their divorce attorneys failed to address the issue of providing life insurance for Dick during that 15 year period. Dick dropped dead (heart attack!) two years after the divorce and Cathy’s alimony checks abruptly ceased. At age 56, without useful job skills, she could only qualify for a minimum wage job- and  it took her five months to find one. While unemployed, she wiped out most of her retirement savings and maxed out her credit cards. At a time of life when most of her friends were comfortably well off and approaching retirement, she had to take a second job to make ends meet.

So if you don’t want to end up like Cathy, pay attention.

If your ex will pay you any support, whether it is a child support or a spousal maintenance (the same as alimony), you want to make sure that he/she has a life insurance policy in effect which names you as the irrevocable beneficiary. The divorce agreement should describe this in detail, and safeguard you against his possible failure to make payments on the policy.

Here are a few important questions/issues that you should address when discussing life insurance in divorce:

  1. How much life insurance should my ex or we maintain and for how long?
  2. Who pays for the premiums?
  3. How do I make sure that my ex keeps me as the beneficiary?
  4. What if my ex can’t get a life insurance?
  5. What happens if my ex does not die and “just” gets disabled?
  6. How do you ‘divide’ up the cash value of the life insurance?

Denisa Tova, CDFA, CFP, MBA is a highly experienced Mediator who is also a Certified Divorce Financial Analyst, Certified Financial Planner, Forensic Financial Expert and Retirement Asset Valuation and QDRO Specialist. Mediator Denisa Tova, CDFA, CFP has Mediated Over 2000 Divorces.