The Joy Of An Ex - Insuring Support Payments
There is never a more important time in life than during a major transition to take
a good look at insurance, or the lack of, to ensure your financial survival will not be destroyed. Separation or divorce is definitely one of life's transitions where insurance is a serious consideration.
It is at this time, that you need to dust off the insurance policies and benefit booklets to determine exactly what each of the family members presently have for coverage and what might be missing.
In some cases, there may be insurance policies that have a savings component involved that may show a cash surrender value within a policy. If there is a cash surrender value, this is the same as any other non-registered investment and it would be treated as part of the assets to be divided. Alternatively, you might discover an insurance policy that has a loan connected to it and that too would be factored into the asset and liabilities equation.
You would then decide if there needs to be any changes to the existing policies, especially the named beneficiaries as the insurance companies pay out to person who is named on their files regardless of who you might have intended the money to go to. There have been many horror stories of cases where the insurance cheque went to a girlfriend or an ex-partner due to forgetting to contact the company and make a change.
The most important concern in dealing with insurance is what need is to make certain the family is able to continue living without unnecessary financial distress.
Whoever is the receiving party of support, they will need to have ongoing stable income more than ever before as they are now facing being the sole party responsible for the running of their own household.
Without the proper insurance, you are unable to be certain that child or spousal support payments are going to continue regardless of what life brings. If your ex-partner dies or becomes seriously disabled, your support could go up in smoke instantly. You could be faced with many more years of raising a family without the benefit of the support that had been agreed upon or awarded by the settlement.
First and foremost, you must examine your situation to determine the need and how that can be filled. This must be done early in the separation process, in fact, the earlier, the better.
Is there currently life insurance that is in place? If there is life insurance, how much coverage is there? Whose life is the insurance on? Who is the owner of the policy? What type of insurance is in place and for how long does this insurance last?
The key factors you need to focus on for life insurance are:
- having enough insurance in place to generate the same amount of income you would receive in support payments for the number of years that it has been awarded
- the payer spouse is the life that needs to be insured
- the recipient spouse is the irrevocable beneficiary of the policy
- the recipient spouse is ideally the owner of the policy
Existing insurance policies may only need a few adjustments to provide the protection needed. The policy needs to cover the life of the paying spouse and the receiving spouse needs to be named as beneficiary, specifically an irrevocable beneficiary, at the very least, so that it can not be changed to someone else's name.
If there is no life insurance in place, it is absolutely necessary to have the insurance applied for prior to the final signing of any separation agreement in case the payer is uninsurable. In the case of someone being uninsurable, there would have to be a different solution provided to protect the support payments or a larger portion of assets given at the time of separation to cover this potential issue.
Copyright (c) 2011 Jackie Ramler
by: Jackie Ramler
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