Life can go in the most unexpected direction. While taking our vows, there’s a chance that we can’t imagine being divorced from our partner sooner or later. But life happens. And sometimes, going separate ways may be the best path to follow. However, how can you make sure you’re on the safe side when this happens? Or what’s the implication of having custody with an estranged partner?
Life insurance is a legal agreement that guarantees you –the insurer – a sum of money will be paid to your beneficiaries in a lump sum when you die. This lump-sum benefit is in exchange for premiums that you paid during your lifetime. Ordinarily, every adult should have life insurance, especially if you have dependents that’ll benefit from the financial support.
But why would anyone going through a divorce or child custody case need life insurance? Here are some of the reasons:
To protect yourself from alimony payments that you may receive
A life insurance policy in hand can help protect you against the assets you’ve worked to build through your lifetime. Although not all divorce proceedings have the same financial implications, life insurance can be an important part of the divorce settlement. As a couple, you may have made agreements on a financial obligation. Existing life insurance can exempt you from paying those alimony obligations if there’s proof that you’ve carried out your own part of the obligation.
To protect you from child support payments that you may receive.
As the spouse who takes custody of the child, the noncustodial spouse is supposed to pay child support that goes towards the welfare of that child. A life insurance policy is one way of ensuring that your ex-spouse takes their responsibility, and it subsists in the eventuality of their demise. So, if you find yourself as the custodian, it’s important to maintain a life insurance policy on your ex-spouse, and maybe ensure that the benefit is high enough to pull your child through, should your ex-spouse die.
To protect your children
Being responsible for your children as their custodian doesn’t cancel out the need for you to have an individual life insurance policy. A life insurance policy will give your child accessible support to be taken care of even after you’re gone.
So, now that we know why we really need an insurance policy to thrive in a divorce or child support settlement, we’ll go on to talk about the relevant types of insurance.
Term Life v. Whole Life Insurance Policy
Many life insurance policies exist today. However, the choice you make will depend on your specific need and what you prefer. Two main policies work for life insurance policies relating to marriage, divorce, and child support. They are the term life insurance and whole life insurance.
Term life insurance
Term life insurance exists for only a period – that is, the term is specified – and then elapses. You have the choice of picking this term when you’re starting out. Most times, the range is between 10 to 30 years, depending on what you want. This policy is the right balance between affordability and long-term financial goals.
Whole life insurance
Whole life insurance is a type of permanent insurance that exists for life and keeps accumulating cash value. It’s the original life insurance policy, but it doesn’t necessarily equal permanent life insurance. It also comes with a withdrawal clause that allows the holder to ‘break’ the coverage and receive his surrender value.
Usually, the whole life plan is the most popular, but you pick your choice depending on the end goal you’re looking to achieve.
Life insurance benefits, particularly, the whole life insurance, are paid when the insured party dies. At that moment, the beneficiaries can file a death claim with the insurance company by submitting a certified copy of the death certificate.
The Sveen v. Melin situation in 2018 shows how important it is to understand your state’s current stand on the issue of life insurance and divorce/child support. Although the Supreme Court ruled against Melin, the aggrieved wife (because of the non-retroactive nature of the law), it’s important to ensure that your partner’s life insurance policy covers the possibility of a divorce issue, or need for child support as the case may be.
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