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Life Insurance During and After a Divorce

Divorced couple discussing life insurance

Written By Doug Mitchell

Doug Mitchell, CLU holds a BA degree in Finance from Auburn University as well as having obtained a Chartered Life Underwriter (CLU) designation from The American College in Bryn Mahr, PA.  Doug has spent close to 30 years in the insurance and financial planning industry and has held licenses to sell securities, long-term care insurance, health.  Doug is also a financial blogger addressing the topics of life insurance, annuities and retirement income planning.

Holly Mitchell  &

Holly Mitchell’s background in life insurance insurance goes back to 1985 when she worked for her father who was a New York Life agent. Holly has a marketing degree from Auburn University and has had a life insurance license since 2008. In addition to advising life insurance for customers all around the country, Holly is our website fact checker.

Rob Pinner   &

Rob Pinner is the founder and CEO of Pinner Financial Services servicing all 50 states. Rob started his insurance career in 2002.

Louis LaBash

Results-driven and innovative life insurance professional with 30 plus years of life insurance industry sales and marketing experience. Recognized as a pioneer in the field, leveraging phone and internet channels to exceed personal sales of over $100 million during the first decade of the 21st century. Creator of a highly effective intuitive IUL life insurance sales software that facilitated the sale of millions of dollars of indexed universal policies by numerous life insurance agents. Proven track record as a Managing General Agent (MGA), Life Agent, IUL Life Insurance Sales Software developer, and leading-edge creator of insurance marketing tools, educational content, and delivery systems.

Table of Contents

As we go down the road of life, there will be many changes. Some are happy, and some are not. If your marriage does not work out – especially if there are children involved – divorce can bring about a wide array of changes in all of your lives.

As bills and expenses begin to pile up during a divorce, the obligations of alimony and child support as demanded by the court system must be adhered to.

As a basis to ensure that the family is financially sound, a judge may require that the spouse making the alimony and child support payments also buy a comparable life insurance policy.

This expense will allow the family’s financial obligations to continue to be fulfilled in the event that the spouse paying child support or alimony dies.

This article will detail how to save money on life insurance when you are forced to buy a policy.

Divorce Changes Your Financial Needs

After a divorce, your finances will likely change a great deal. If you are the primary breadwinner in the household, it’s probable you will be required by your state or local government to pay alimony to your former spouse.

In addition, if you have children, child support payments will also likely be required.

If you were a stay-at-home spouse, you may have some changes in your financial situation. It is probable that even if you receive alimony payments, you may be required to find employment in order to meet your living expenses. It may also be necessary to cut back on certain expenses in order to save money.

In addition, if you are depending on alimony and child support payments from a former spouse, it is likely that a life insurance policy on your ex’s life will be required in order to ensure that those payments will continue, even if your former spouse should pass away. This policy may need to have certain requirements as to its face amount for proceeds.

What Happens to Life Insurance in a Divorce?

You may need to consider making changes to your life insurance policy after a divorce. There are 3 factors to consider when determining how much life insurance coverage you will need after a divorce.

Alimony payments – One of the criteria for the amount of the life insurance death benefit amount will be the amount of ongoing alimony payments that will be required. This will depend on how long these payments will be necessary.

Child support – The amount of ongoing child support payments should also be quantified directly into the amount of the policy’s death benefit proceeds, as well as for how long.

Additional needs – You may also want to consider what your children’s additional needs would be should the breadwinner pass away. For example, would you want them to have a future college fund set up? An account to pay for a child’s future wedding? Consider any additional financial needs that you may want to be covered with the proceeds of a life insurance policy and then add this to the amount.

Divorce Agreements with Mandatory Coverage Requirements

A divorce agreement is a legally binding contract and can, therefore, be extremely difficult to alter once it has been signed. Oftentimes in a divorce agreement, life insurance coverage will be required in order to secure both alimony and the payment of child support. Therefore, should something happen to the primary breadwinner, these payments will continue being met as promised.

With this in mind, it will be important to obtain a life insurance policy that will not only meet the proper amount of such payments, but also the proper duration. Therefore, depending on the ages of the children – and the length of the payment agreement – an appropriate type of policy should also be determined.

Typically, for shorter durations, a term policy may be the better option. These plans are generally considered as “temporary” coverage, as they have shorter 10 or 15 year durations.

Who Will Pay the Life Insurance Policy Premiums?

Determining who will pay the life insurance policy premiums is a major consideration. It is essential that the premiums are paid so that the policy doesn’t lapse. Therefore, if it is felt that an ex-spouse may default in this area, it may be best to pay them yourself. Otherwise, if the ex-spouse will be paying the premium, a copy of the premium receipt should be sent to all parties.

Determine the Policy Beneficiary

You will also need to determine who will be the beneficiary of the life insurance policy. This is the person (or persons) who will be the one who to obtain the payout, as long as the insured passed away while the policy was in force (premiums up-to-date).

In many instances, the ex-spouse will be the policy beneficiary or other times you may name the children directly as the policy’s beneficiaries.

How to Get Life Insurance At Lower Rates

Depending on the type of policies that you have in place now, you may be able to save on the monthly premiums by making a few adjustments. In other words, if the judgment required that you invest in a policy for two kids in the amount of $250,000 per child until they become legal adults, then it would benefit you to have in place $500,000 worth of protection.

If you have a son who is 12 years old and a daughter about to turn 16 you can reduce the total coverage amount to $250,000 at your daughters 18th birthday. Many life insurance companies will let you lower the coverage and in turn lower your premiums while the policy is in effect. Before you purchase a policy make sure you will have this option in the future.

A lot of people tend to rush buying a life insurance plan. They go out and buy some generic policy just to meet the decree, but we suggest just doing a little prep work beforehand.

Figure out how long you’ll need a policy. The length of the plan is one of the pivotal factors of pricing. The longer the plan, the higher the premiums. If you find out EXACTLY how long of a plan you need, you won’t have to pay for extra protection.

Buy Term insurance

Say the court demands as part of the divorce settlement that an insurance policy must be in place. If so, a term policy is the best choice for the most affordable coverage dollar for dollar.

It makes good sense to not overextend the obligation longer than needed; so using your alimony payments as an example, only get a policy term of 10 years for 10 years of alimony responsibility. Buying a longer-term policy is unnecessary and will cost you more money.

We suggest looking at other factors when you’re buying term life insurance. Sure, you have to buy one for the divorce, but you should consider other parts as well.

If you don’t have another policy, you will need one to cover the cost of your mortgage loan. Don’t just buy a term plan simply to meet the requirements of the decree.

Consider an Annual Renewable Term

Annual Renewable Term policies are great when you only need coverage for a couple of years or so. You can basically buy a short-term insurance life policy a lot cheaper than a 10 years term. With an annual renewable term, rates will increase each year; however, they start off much cheaper than a 10-year term policy.

To understand this better, let’s illustrate. If you are an average healthy 40-year-old male with enough coverage in place at $250,000 to secure the court’s request, your annual obligation on a 10-year term policy would cost $322. Thus the same coverage amount for three years would total $966.

However, a Renewable policy would cost $182 in the first year, and $210 in the following year. And $235 in the year after that, totaling $339 which would be $594 less over three years than with the 10 year term policy.

How to Get Life Insurance Fast During Divorce

If you need life insurance to fulfill a divorce decree, and you want to get it fast, a traditional term plan might not be the best option. They can be the cheapest, but they aren’t the fastest to get.

If you’re looking for speed, a no exam policy is going to be noticeably faster than a traditional plan. The medical exam is the most time-consuming part of the life insurance application. If you take it out of the mix, everything speeds up.

Instead of having to wait more than a month you can get approved in days. There are some select companies which have no exam plans optimized to give you a decision instantly. Other companies can take as long as a week. When you compare it to the almost 2 months of a normal policy, it’s lightning fast.

As you can guess, it’s not all good. There are some drawbacks to no exam plans.

First of all, they aren’t cheap. Per every dollar of insurance, you’re going to spend around 50% for no exam life insurance.

Secondly, you don’t have the same freedom with no exam. The company is going to dictate how much you can buy. Carriers have strict limits on no exam coverage.

You need to think long and hard about what really matters to you in regard to life insurance. Do you want it quick or do you want as cheap as possible?

Final Thoughts on Life Insurance and Divorce

Following a divorce, you’ll be best served by working with an independent agent. Or at least one who can shop your rate for you from several different companies. This saves you the time and hassle of making a ton of calls. But more importantly, it can help you save on payments over the years of the policy.

Term life insurance is the cheapest option for coverage, but you shouldn’t just go to the first company you find.

Buying life insurance from whatever company your cousin works for could cause you to spend way too much for your plan. One thing we tell every client is to do a little window shopping before.

Just imagine how frustrating it can be to have to call every single company, go through the quote process, just to receive a coverage quote WAY outside of your budget.

It can make you want to throw your phone out of a window (we don’t recommend this). Instead of tossing your phone, give us a ring.

What makes us different than any of the other thousands of companies out there? We don’t actually provide insurance. We are unrestricted agents who have the ability to float between companies and sell you the cheapest plan.

Our agents will sell you the cheapest plan, regardless of which carrier it is.

Comparing rates among A or A+ rated companies is your best bet to saving money. Use our quote form at the top of this page to compare quotes. Or call us at 800-712-8519 and we can help you figure out the best life insurance option for you.

Picture of Doug Mitchell, CLU

Doug Mitchell, CLU

Doug Mitchell, CLU holds a BA degree in Finance from Auburn University as well as having obtained a Chartered Life Underwriter (CLU) designation from The American College in Bryn Mahr, PA. Doug has spent close to 30 years in the life insurance and financial planning industry and has held licenses to sell securities, long-term care insurance, health. Some other notable items about Doug: Top of the Table Million Dollar Round Table member (MDRT). (MDRT is a global, independent association of the world’s leading life insurance advisors) | Premier Partner with Lincoln Financial and Cabinet Member | Served two years as President of the Auburn/Opelika Association of Financial Advisors | Life Millionaire status at Horace Mann Insurance Company and was awarded the Life Agent of the Year Award | New York Life, Executive Council Member | Currently serves as President of Ogletree Financial, a life insurance General Agency. | Doug is also a financial blogger addressing the topics of life insurance, annuities and retirement income planning.

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