Should your divorce include an order for life insurance?

You may not have thought about life insurance recently, but it could be an important part of your divorce agreement or order.

In North Carolina as in other states, parents are legally obligated to provide support for their children. Likewise, you could be obligated to provide spousal support (alimony), at least for a period of time. If your divorcing spouse has been ordered to pay child or spousal support, what would happen if they died?

Assuming your ex has changed their estate plan and beneficiary designations, you, and in a worst-case scenario, your children, could end up with nothing.

Therefore, many divorce agreements call on the payor spouse to carry sufficient life insurance to pay their obligations in the event they die. Should your divorce include this order?

How much life insurance is enough?

If you will be receiving child support, spousal support, or both, you may wish to ask for an order or agreement for your ex to maintain life insurance after your separation. How much would be sufficient? Here are some questions to consider:

• How much protection do you need now? Will your needs change over time, such as when your youngest child exits high school?
• What are the expenses and obligations you expect in the event of your ex’s death? Consider your mortgage premiums, any unusual child-related expenses, your retirement savings and any foreseeable emergencies. Will these change over time?
• Is there already a policy in place that could be continued? Will that policy terminate if your ex leaves their current job?
• Is there equity built up in the policy? What is the cash surrender value of the policy?
• Is the policy a good investment or would another type of investment be preferable?
• What is the most affordable way to provide the coverage?
• Who should pay for the insurance policy or other investment?

Ensuring that your ex’s financial obligations would be covered in the event of their death could be crucial toward your long-term financial stability. You should discuss the possibility of your ex providing life insurance with your divorce attorney and make certain you will receive what you are owed.