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How to deal with life insurance during a divorce
Divorce is complicated. But life insurance doesn’t have to be.
Life insurance is something you purchase out of love. After all, in most cases, you’ll never receive any personal return of value from the life insurance policy you pay for — instead, that value is set aside for your loved ones, who will receive the death benefit in the event that something happens to you.
That’s why life insurance is an important topic when you’re going through a divorce. That’s because, more often than not, your spouse is your primary beneficiary, and you will need to decide whether you want that to remain the case. If you have children, divorce and life insurance can become even more complicated.
Keep reading to understand your life insurance options during divorce.
In this article:
Do you need to change your life insurance beneficiary after a divorce?
Naming a beneficiary is an integral part of signing up for and maintaining your life insurance policy. After all, if you pass away, your life insurance company needs to know to whom they should pay the death benefit.
In most cases, the primary beneficiary for married life insurance carriers will be their spouse. If that’s the case for you, and you’re going through a divorce , your first instinct is probably to change your beneficiary to someone else. Before you do, think about the following.
What it means to change your beneficiary
When you remove a beneficiary from an insurance policy, it means that when you pass away, that person won’t receive any of the benefits of the policy. Instead, the benefits will go to your new beneficiary or beneficiaries.
Why keep an ex-spouse as a beneficiary?
Although it might seem strange at first, there might be several reasons to keep your ex-spouse as a beneficiary on your life insurance policy. For example:
- Court order: In some cases, your divorce documents might stipulate that, as part of your divorce, you continue making your life insurance payments with your ex-spouse as the beneficiary. In this case, if you change the beneficiary on your insurance policy, you’re disobeying a lawful order from the court.
- Age of your children: The primary beneficiary on any life insurance policy must be an adult. So, if your oldest child isn’t yet 18 years old, you might want to strongly consider keeping your ex-spouse as the primary beneficiary of the policy, at least until your oldest child becomes an adult, with the understanding that the death benefit will be used to pay for things related to the kids. (More on this below.)
- Compassion: Not all divorces happen in frustration and anger. In some cases, you might wish no ill will to your ex-spouse. On the contrary — you want to see them do well. In this case, you might leave your beneficiary as-is out of compassion for your ex-spouse, even after a divorce.
What happens if you don’t change your beneficiary?
When you pass away, your life insurer will pay your policy’s death benefit to your listed beneficiaries. That means if you don’t change your beneficiaries after a divorce, your ex-spouse will likely receive that benefit.
Life insurance considerations after divorce when you have kids
As mentioned above, one reason to keep your ex-spouse as a beneficiary is because you have children. Here are some things to consider.
Will your ex-spouse be able to support your children if something happens?
If your children are under 18, or even young adults, they likely rely heavily on you and their other parent for financial support. If something were to happen to you, would your ex-spouse be able to provide the support your children need?
That’s an important consideration because, oftentimes, keeping an ex-spouse as a beneficiary has little to do with wanting to support your ex-spouse. Instead, for many, doing so is centered around affording the ex-spouse the ability to take care of your children when they’re in need if you’re not there to do so.
Sure, if your oldest child is 18, you could make them the primary beneficiary on your policy. But would a young adult be as responsible with money as their parents? For many, the answer is no.
This goes hand in hand with helping your ex-spouse support your children after you pass. You want to be around to see your children graduate high school and support them as they work their way through and graduate college. If you’re unable to do so, do you think your ex-spouse will be able to support them on their own?
If not, it might be a good idea to consider the cost of higher education and allocate that portion of your benefits to your ex-spouse, with the understanding that the money is being provided to help your children achieve higher education.
Support as an adult
About 1 in 3 adults in the United States are financially dependent on their parents, according to one recent study. As you think about your life insurance policy after a divorce, it’s important to consider whether or not your spouse will be able to provide your children support as young adults. If not, it might be best to use a portion of your life insurance policy to offer supplemental support.
Should you change how much life insurance you have after a divorce?
If you’ve decided to change the beneficiary on your insurance policy after a divorce, or even if you kept your ex-spouse listed, you might be considering changing how much life insurance you have. After all, there are likely strong arguments for increasing or decreasing the amount.
So, what’s the best option? That’s entirely up to you. Nonetheless, you’ll find reasons to adjust your policy upward and downward below to help you make that decision.
Why consider getting more life insurance?
There are several reasons you might consider buying more life insurance (typically through purchasing a second policy) after a divorce. These include:
- Supporting your children: In a family where both spouses earn money, it’s possible that you viewed your life insurance policy as a way of supplementing your spouse’s income in the event that you’re not around anymore. Because of this, you might have purchased less than you’ll need now that you’re on your own.
- You’ve achieved milestones: If you’ve achieved financial milestones throughout your marriage (such as earning a raise), you might not have adjusted your life insurance to match. In this case, what you leave behind for your beneficiaries might not be enough to provide the support they’re used to. For example, will your benefits be enough to keep your children in your family home?
Why consider adjusting your policy’s value downward?
There are several reasons you might consider adjusting your policy’s value downward as well. Among the top reasons are:
- Contentious divorce: Your divorce was like pulling teeth. You never want to see your ex-spouse again, and your children are all doing well for themselves. In this case, reducing your life insurance policy’s value might make sense since your children don’t need as much support and you’re not interested in supporting your ex-spouse.
- Your financial ability: After a divorce, two incomes suddenly become one. This can lead to significant financial hardships. If you’re having a hard time paying the premiums for your current insurance policy, consider adjusting the policy value downward to make payments more manageable.
- New financial status: Perhaps during this time period you paid off your mortgage, or completed other common financial obligations. These might not be directly related to your divorce, but they are common reasons why you might need less life insurance.
If you go down this route, however, please note that you still want to leave your family with enough coverage in case the worst should happen. A common rule of thumb is to get a policy worth 5 to 10 times your annual salary.
How Haven Life can help
Whether you’re currently single, married, divorced, or something else, life insurance can play a key role in planning for the future. That’s because life insurance is a way of providing financial protection for anyone who counts on you to pay for everyday essentials. That might be for a spouse — but it might also be an adult child, a sibling, aging parents, a beloved charity, or some combination of the above.
Term life insurance is one of the most affordable types of life insurance, because it provides coverage during the years you need it most — when you’re incurring expenses like a mortgage or a child’s tuition, and when you’re earning an income. It also covers the years when you’re young and healthy. In other words, it’s coverage for the years when you’re unlikely to pass away, but your passing would cause serious financial hardship to those you love.
Haven Life has made getting life insurance a breeze. You can get a free online life insurance quote, then begin the online life insurance application process in minutes. Peace of mind awaits — and in the most stressful times of life, that can be an invaluable relief.
About Joshua RodriguezRead more by Joshua Rodriguez
Our editorial policy
Haven Life is a customer-centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.
Our editorial policy
Haven Life is a customer centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.
Our content is created for educational purposes only. Haven Life does not endorse the companies, products, services or strategies discussed here, but we hope they can make your life a little less hard if they are a fit for your situation.
Haven Life is not authorized to give tax, legal or investment advice. This material is not intended to provide, and should not be relied on for tax, legal, or investment advice. Individuals are encouraged to seed advice from their own tax or legal counsel.
Haven Term is a Term Life Insurance Policy (DTC and ICC17DTC in certain states, including NC) issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001 and offered exclusively through Haven Life Insurance Agency, LLC. In NY, Haven Term is DTC-NY 1017. In CA, Haven Term is DTC-CA 042017. Haven Term Simplified is a Simplified Issue Term Life Insurance Policy (ICC19PCM-SI 0819 in certain states, including NC) issued by the C.M. Life Insurance Company, Enfield, CT 06082. Policy and rider form numbers and features may vary by state and may not be available in all states. Our Agency license number in California is OK71922 and in Arkansas 100139527.
MassMutual is rated by A.M. Best Company as A++ (Superior; Top category of 15). The rating is as of Aril 1, 2020 and is subject to change. MassMutual has received different ratings from other rating agencies.
Haven Life Plus (Plus) is the marketing name for the Plus rider, which is included as part of the Haven Term policy and offers access to additional services and benefits at no cost or at a discount. The rider is not available in every state and is subject to change at any time. Neither Haven Life nor MassMutual are responsible for the provision of the benefits and services made accessible under the Plus Rider, which are provided by third party vendors (partners). For more information about Haven Life Plus, please visit: https://havenlife.com/plus
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