Life-Insurance Considerations After Divorce
When you're filing for divorce, there are a lot of small details that you need to consider. One of the things that many people forget about is their life-insurance policy. Whether you're still in the midst of the legal process or have already received your degree, there's never a wrong time to address issues like this. Here's a look at what you should know about how your divorce will affect your life-insurance policy.
You May Need to Change Your Beneficiary
If your former spouse is listed as the beneficiary on the policy, he or she will receive the money from your policy even if you're divorced. The insurance company doesn't consider your marital status when they distribute life-insurance funds.
Before you change the beneficiary, consider a few things. First, if you have children, who is going to care for them in the event of your death? Do you want to leave the life-insurance payout to that person to contribute to the costs of caring for your kids? As an alternative, you can have the policy paid out into a trust for the kids so that they can draw off the account when they reach a predetermined age.
You'll Want to Evaluate Your Coverage
Chances are good that when you bought your life-insurance policy, you were basing the benefit amount on being a dual-income household. Now that you've divorced (or are divorcing), you are or will be a single-income household. You need to consider all of the things that your children will need in the future as well as any financial amount that will help with the care and upkeep of your kids. Think about how old your children are now and how much those care costs may add up over time. You might find that you want to increase your death benefit to help cover those expenses.
You May Want an Extra Policy
If you're unsure about your insurance coverage or want to have more protection for each of your children, you might want to invest in policies for each child. Talk with an independent insurance agent about this because they can help you shop around to find the best rates for your health, age, and risk status. You'll likely need a new medical examination if you're going for a whole-life policy, but your insurance agent can help you prepare and understand what to expect with each company that you are considering.
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