Why Life Insurance may be Required in Divorce Settlements
Going through a divorce can be a trying and complicated process, and many times there is a financial obligation that is due to one of the parties involved. The payment could be child support, alimony, or some other type of financial settlement and may be payable by way of lump sum or installments. However, what would happen if the individual who is obligated to make payments were to die? For this reason, life insurance should be included in your divorce settlements, if possible.
Life insurance is typically a boring topic in and of itself, but its practical purpose in situations such as these can prove invaluable to protecting the parties that are relying on the income to either provide for a child, or make ends meet. In these scenarios, the court will take into consideration the total amount of obligations that the payer has, and may require that they secure a life insurance policy to provide the certainty that the payment be met.
How would Life Insurance Protect You?
Let’s take the following example into consideration.
A husband and wife have been married for 15 years and have 3 children ranging in age from 5 to 15 years old. In going through divorce proceedings, it is determined that the husband will owe $1200 a month in child support until the time that the 5 year old reaches the age of 18 and becomes an adult. This would equate to just over $187,000 in payments over the next 13 years, not counting inflation.
In this situation, the court may order that the husband maintain a $200,000 life insurance policy. This plan would make sure that the obligation is fulfilled if something were to happen and he was to meet an early demise. In addition, typically the policy must be of the type that is guaranteed to have a policy duration of at least as long as the obligation is payable. This is usually a term life insurance plan, but could also be a type of permanent insurance as well.
If you have any other questions surrounding a potential divorce, please feel free to contact us. We have a staff of knowledgeable attorneys that are ready to meet your needs.