Should Your Divorce Include an Order for Life Insurance?

It may be a good idea, especially if you have children. If one spouse will be paying child support and/or spousal maintenance, an insurance policy could be added to ensure that support continues if the payor were to die.

Insurance can be useful, for example, to replace expected income should it be lost, to pay off a mortgage, for emergencies, or to meet extraordinary child-related expenses. Unfortunately, many people skip this step when negotiating their divorce agreements.

You may already have life insurance in place. If you already have a life insurance policy on the payor spouse, you can include its continuation in your divorce agreement, or ask the judge to order that it be continued. However, you may want to examine your policy to ensure it will still meet your needs.

A large group of people, however, have no life insurance in place during their marriages. If this describes you, you may still want to consider having an order for life insurance as part of your divorce agreement or decree.

Consider What You Need and What You Can Afford

First, consider how much insurance is needed. An insurance broker can help you understand your current needs and the cost of a policy that would cover, for example, replacement of the child support you are expecting to receive or pay.

You should also consider whether to buy a straight insurance policy or one that builds equity over time as an investment vehicle. These universal or variable life policies can be a bit more expensive, but they hold value.

Another item to think about is how your insurance needs will change over time. For example, you might only need coverage to replace child support until your youngest child reaches a certain age, such as 18 or 21.

Here are a few more questions to answer:

• Should both spouses be required to have life insurance, or just the one who will be paying child support and/or spousal maintenance?
• Who should pay for the insurance? The payor or the beneficiary spouse? Should the cost be shared?
• Should there be a penalty for failing to keep up the policy?
• Is there a hybrid approach that could be created? For example, you could order a less-expensive policy if your ex pledges to leave their assets to you and the children in their will. Or, you might be able to self-insure with an investment portfolio.
• If the policy has a cash surrender value, who should receive it?

Whether you plan to negotiate an agreement or take your divorce to trial, ask your divorce attorney about how to get an order for insurance included.