Role of Life Insurance in Divorce

While it may seem counter intuitive, insuring the life of an ex-spouse makes sense in many cases. When divorce involves children or a dependent spouse receiving alimony, one should consider the utility of having life insurance in place to make sure the financial requirements of the children or spouse are met? At the risk of stating the obvious, given the stakes, a term life policy on the obligor (person owing child support) is probably recommended. Especially when considering the comparatively low cost of term policies for most adults with minor children.

Obviously the need for life insurance doesn't end when a marriage does. Unfortunately, for whatever reason, life insurance is neglected when a marriage terminates. The consequences, especially when minor children are involved, can be devastating. Since the need for support continues at least, until the children reach the age of majority, a lump sum payment upon death can make certain of the continuation of support if an untimely death occurs. If the parties agree to it (or even if they don't, as you will see later) the final decree of divorce can place a requirement that the obligor keep a term or other life policy in place, for the benefit of the children.

Often, the cost of such protection is very affordable in light of the devastation which could occur should the obligor die prematurely. Most parents with minor children are still at an age, where purchasing insurance, especially term, is quite low. Even more cost efficient may be a declining term policy. Declining term is insurance in which the death benefit declines over the years, and is generally a lower cost premium. For example: A $250,000 term policy with a highly rated carrier costs a healthy 25 year old around $25 a month with coverage for 20 years. A 30 year old, who might only need coverage for 10 or 15 years, could get the same coverage.