Divorce, or legal separation moving toward divorce, is a tumultuous and difficult time. Even amicable divorces create financial difficulties for the parties involved as the “family corporate” is dissolved, assets are split, and what was once a partnership becomes two sole-proprietorships.
During the course of creating your separation agreement, if there are children involved, there may be a requirement (of both parents/parties) to place additional life insurance to provide for the children as the final beneficiary1. The outline of the required life insurance will generally cover the following:
- Amount per child
- Duration coverage needs to be maintained [e.g. until the child(ren) reach age 23]
- Additional conditions or considerations based on your agreement and/or state law
This is a sensitive time in someone’s life and the financial strain is often enormous. With that in mind, we have a few recommendations on the best way to proceed with securing the life insurance you need for your separation agreement or divorce.
- Once the amount is outlined for you, select a high quality (A rated or better) term life insurance carrier with a low premium cost2.
- Chose an agent who understands the intention of this life insurance, and is not going to try to sell you a bunch of other insurance, or require meeting after meeting to discuss options, that you do not necessarily need to pursue at this moment.
- Understand that the underwriting process for life insurance, on average, takes 6-8 weeks. Start early with your application and exam in order to secure your life insurance on the required timeline. A quality agent will help move your underwriting process along with the carrier, but there are a number of factors that can slow the process down.
- You may need life insurance for 17 years (until your child is 23, for example): most carriers do not write insurance for “odd” years, but there are options. Your agent can show you the cost comparison of 20 year term insurance versus 17 year term insurance. While we do not recommend cancelling life insurance without extensive consideration – remember, term insurance does not have a cancellation penalty.
- You may not get (or received in the past) the “perfect” offer from the carrier you selected, but you may need to place that insurance in order to meet your agreement conditions. Once you have met your separation agreement conditions, the dust has settled, and life has begun its new course; you can work with an agent to see if there are better/less expensive options in the marketplace. Your requirement is to have life insurance, not a particular life insurance 3
During this difficult time, we wish you nothing but the best. We are always honored to be of service if life insurance needs arise and have helped numerous clients during this period in their life.
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 The intention of this article is not to provide legal advice regarding divorce or separation; that should be provided by a family law (divorce) attorney or other retained legal counsel. Similarly, your attorney will advise you on how beneficiaries should be set up and if a trust document is required. All states have particular, and sometimes unique, laws and procedures with regard to the process of dissolution of a marriage. In matters such as these, you should only proceed with a decision pertaining to life insurance based on the advice of your attorney.
 Generally speaking, the amount and duration of life insurance already in place will be considered before an additional amount is outlined. Note: term life insurance is not the only life insurance product that will satisfy the conditions of the agreement, but it will likely be the least expensive. Discuss your options with a trusted agent to make an informed decision.
 Replacing existing life insurance requires additional paperwork, disclosures, and should be discussed with a reputable agent prior to submitting an application. Replacing existing life insurance, or any insurance for that matter, also should always demonstrate a “tangible benefit” to the client in the form of:
- Lower premium cost for the same face amount.
- Better health rating for the same policy, which may also decrease premium cost.
- Larger face amount of insurance for the same premium cost.
- “Reasonable” client-determined need; an example would be that the client wants to pursue more life insurance from a high-quality, low-cost carrier; if a favorable offer is returned, the client will replace the existing insurance.