Many people are unaware life insurance can actually be used as a part of a divorce settlement.
Though it’s easiest to include it as part of the divorce settlement, it can also be incorporated even after a divorce has already been finalized.
The main way life insurance is used in a divorce settlement is to protect alimony and child support.
Chances are you and your child depend on the alimony or child support in some way.
If your ex-spouse suddenly dies, what’s going to happen?
Without a life insurance policy, your alimony or child support suddenly stops. This can be a life-changing moment as you’re now left scrambling to maintain your finances.
Life insurance helps ensure your alimony or child support continues even after your ex-spouse dies.
Simply put, life insurance to protect alimony and child support is a great idea to help you prepare for the unexpected and stay financially safe when unforeseen circumstances arise.
Buy Your Own Policy To Safeguard Your Children
Including life insurance as part of a divorce settlement starts with buying your own life insurance.
You must make sure you are covered since you’re not only the caretaker of your children, but also the main monetary provider.
If you die unexpectedly, your children will continue to need financial support. Life insurance ensures they will continue receiving this support even when you are no longer around.
Of course, your sudden absence will still have a huge impact on your children, but at least your children will still have a sense of financial security.
Whole life is a more permanent option. It lasts until you die.
It’s more expensive, but has several additional benefits. However, most single parents don’t need whole life coverage.
Set Up Your Life Insurance Policy (Correctly)
Your children are the main reason you bought your life insurance policy.
This means both the plan you buy and the way it’s set up must put your children first. You need to ensure they are the ones with access to the benefit, or at least the person responsible for the money can only use it as you inteded.
Simply put, you must make sure your children are the only ones who will be able to utilize the money left to them from the life insurance policy.
There are many ways to take such precautionary measures, including naming a living trust as the beneficiary of your life insurance policy.
Now, About The Life Insurance Coverage On Your Ex-Spouse
It’s equally important for your ex-spouse to have life insurance as it is for you to have life insurance.
Chances are they are paying some sort of alimony or child support. It’s essential this financial support continues even if they die.
The best method is for the ex-spouse to take out the life insurance policy themselves. This can be worked into the divorce settlement to include you and the children as the beneficiaries.
However, it’s also possible for you to buy life insurance on your ex-spouse.
They must know you’re doing so and be okay with it. It’s more complicated to buy life insurance for someone else, but it’s still possible.
Furthermore, you must prove you are benefiting financially from their life before you can buy a life insurance policy on them.
Alimony or child support is an easy way to do this.
Note: one of the main benefits of buying life insurance coverage for your ex-spouse is it lets them off the financial hook, in a sense.
In other words, they won’t be financially liable for payments towards the policy.
When you buy life insurance on someone else, you are responsible for the required payments.
Both Single Mothers and Single Fathers Are Covered
It’s important to note both single mothers and single fathers can benefit from life insurance to protect alimony and child support.
Just as mothers can buy life insurance on their ex-husbands, so can fathers buy life insurance on their ex-wives.
The same rules apply no matter the specific scenario.
What’s The Best Life Insurance Policy As A Single Parent?
There is no single company or policy who provides the best life insurance for single parents.
The right company for you depends on your own needs and preferences. This why we recommend doing your own research to find one which best suits you.
We recommend you start by deciding between whole life and term life coverage. This narrows down your search greatly.
Though both types of policies have their benefits, term life coverage is usually best in the sense that it will cover your children until they’re able to support themselves. Then payments will cease.
Whole life does provide more extensive coverage, but it’s almost overkill when you consider it will likely continue long after your children come of age, and after alimony or child support has ended.
After you decide between term life and whole life coverage, you should start get quotes from several different life insurance companies.
Getting multiple quotes will enable you to compare and contrast both rates and types of coverage between several insurers all at once.
Nest, know the life insurance application process can be extensive.
The underwriters use this information to assess your risk to the company. This then informs them to set the premium you’ll pay.
Questions you’ll be asked are aimed at your lifestyle choices, current health, family health, and drinking/smoking habits.
On the flip side, when buying life insurance on an ex-spouse, these questions will be asked about them rather than you.
Many life insurance companies also require a medical exam to be set alongside your life insurance application to prove the information included is accurate.
Life insurance can be an essential component of your divorce settlement.
A policy bought on your ex-spouse will ensure alimony and child support payments continue even if they unexpectedly die.
This death benefit guarantees you and your child will not be put under any undue financial stress in the event of their death. You will be able to move forward with the financial stability you deserve.
You should also consider buying life insurance for yourself. This further helps protect your child in the event you yourself die.
Combining personal life insurance with life insurance on your ex-spouse provides the best overall financial protection to your children.