Properties and Finances

Many couples are a little surprised to find that it is even possible to negotiate a divorce settlement on life insurance. It is especially likely if the life insurance policy has built any cash value. Some life insurance policies can be used as a loan in the event that it is necessary before the death of the insured. Cash value life insurance policies are particularly left on the table during a divorce settlement. Term life insurance, which accumulates no cash value but is a promise of payment upon the insured individual’s death, can still enter the divorce settlement.

A divorce settlement on life insurance can be handled smoothly and without a lot of drama. The spouse that is not insured on the policy needs to end up with the policy’s control. It is too easy for the ex-spouse that is insured to allow the coverage to lapse and to change beneficiaries through their place of work. Thus, during the divorce settlement on life insurance it is vital that control of the policy goes to the non insured spouse.

Of course, there are then premiums to deal with. Premiums on two insured spouses that are now controlled by the ex spouse often come close enough to cancelling each other out that it isn’t worth setting up a financial arrangement for the premiums. However, if only one spouse is insured, the premium payments can be easily added into an alimony or child support payment. In the absence of an alimony or child support arrangement, an annual sum can be transferred to the non insured spouse to make sure that the premium payments are covered.

A lot of spouses insist on creating a reasonable divorce settlement on life insurance upon learning that it is a possibility. If the insured spouse ends up remarried or needing life insurance for a second family he or she can take out another policy, provided that they are still insurable. All spouses should be aware that just because an ex spouse is the beneficiary of a life insurance policy they are not legally obligated to take care of final expenses, which can leave a heavy financial burden for loved ones that will want to provide arrangements. Couples with children are much better off creating a reasonable divorce settlement on life insurance to insure that the children receive financial benefits from their parent in the event of a premature death.