After a divorce, there are so many things to sort out, that life insurance can be something that is forgotten. However, it is important to make sure that it is considered and checked over. There are a number of things that will need to be addressed.
Couples will often have their life insurance set up so that their spouse will be the beneficiary if they die. The payout may just be added to their estate and then whoever will inherit, as named in the will, gets the money. As long as the will has been changed to no longer name the spouse then this should work out okay. If the insurance is tied up in a trust then this may need to be altered so that the beneficiary is no longer the spouse.
Amount of Cover
The amount of cover is very important and it may need to be changed after a divorce. You may need to consider what your income is and whether your dependents will need more money now that there is only one breadwinner in the family. It is worth considering the situation and makes changes accordingly. It is worth considering your ex-spouse and what their income is as well as yours if you have children, so you can make sure that they will be well supported financially if you die.
If you had a joint life insurance policy then you will probably want to make the necessary changes to create separate policies. This may have been on a mortgage, for example, which will need to be sorted out. Whoever takes over the mortgage will need to make sure that they have the required amount of cover so that it is paid off should they die. Joint policies will need to be separated so that both parties have their own cover. It is important to think about how much cover may be necessary and how long to take the policy out for. If you have mortgage life insurance then this is easy, but if you are considering how much may be necessary for your beneficiaries, then this could require some further planning. It can be cheaper to have a term policy, which is wise to have as long as your beneficiaries will need financial support, perhaps until they are old enough to earn their own money.
If You Have no Insurance
If you currently have no life insurance, it may be worth considering obtaining a policy, now that you are divorced. It may be that you or your spouse may need to give up work to look after the children or that because of the divorce a property is sold and there are fewer assets for the children to inherit. Each individual situation is obviously different. You need to consider whether your children will need extra cover considering the change in circumstances. Think about whether employment status has changed for either or both of you and how that might affect the children should one of you die. Also consider your assets and savings and whether these have significantly reduced as a result of the cost of the divorce and whether not having these could increase the need for insurance.
Divorce is an emotional time; it can be costly as well. Thinking about whether you need to pay out more money for life insurance may not be welcomed thoughts. However, it is important to have the peace of mind of knowing that your loved ones are well looked after. Therefore it is worth considering how they might be cared for financially, if you die.