May 1, 2017
According to recent research by Philip Cohen, Professor of Sociology at the University of Maryland, 52.7 percent of marriages in the U.S. end in divorce. And even though it’s challenging enough to navigate the emotional aspects of divorce, it’s also imperative to handle the financial aspects properly as well. You’ll need to divide your assets and make provisions for your new situation. One of the most important financial factors to consider is your life insurance policy. Ask yourself the following questions:
• Should you cancel the policy? If your ex-spouse doesn’t rely on you financially and you have no other dependents, you might want to simply cancel your policy. However, your options will vary depending on whether it’s a term life policy that’s tied into your mortgage (or some other debt) or a policy that builds cash value. Exactly how you can proceed with your policy will be determined during your divorce proceedings and specified in your divorce settlement.
• Should you change beneficiaries? If your spouse is listed as the beneficiary of your policy, you’ll probably want to change the beneficiary designation to your children, your new partner, your parents, or any other family member who’s reliant on you. Keep in mind that if you list any children who are still minors, any payout will be handled by their legal guardian.
• Will the insurance company reassess my policy? Unless your health, lifestyle, or occupation have dramatically changed due to your divorce, then the insurer isn’t likely to reassess your insurability and premium.
• Should you take out a life insurance policy on your ex-spouse? If you’ll remain dependent on your ex-spouse after divorce, it’s advisable to either transfer the ownership of an existing policy to you or to take out a life insurance policy on your ex. This will ensure you receive enough funds to cover alimony and/or child support payments in the event he or she dies.
• Who should keep ownership of the policy? The person who’s listed as the owner is the only party who can make changes or cancel the policy. Especially if your divorce isn’t amicable, you should make sure that you are the listed owner.
To determine what do with your life insurance policy, first consult with your divorce attorney as to what your legal obligations are according to the divorce settlement. Then, when you have all the necessary information, contact your life insurance agent to make the required adjustments to the policy.
The team of expert life insurance specialists at Liberty Financial Group have helped many people navigate major life changes, including divorce. Contact us today to find out how we can help you.
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