There's no insurance against divorce, but there are ways to use insurance to protect yourself while you are still financially dependent on your ex-spouse. If you expect to receive either child support or alimony, you can't afford to overlook important insurance issues during your divorce.
What If Your Ex-Spouse Becomes Disabled?
Losing alimony or child support payments due to the disability of an ex-spouse can wreck your finances. Insist that your ex-spouse maintain a disability insurance plan for as long as you are owed support payments.
Because of the way that disability insurance works, your ex-spouse will be named as both the owner and beneficiary of the plan, not you. That means that you wouldn't be automatically notified if your ex begins using the plan. You also wouldn't be automatically notified if your ex stops paying the premiums, so you want to make sure that those concerns are addressed.
What If Your Ex-Spouse Dies?
You can be named as both the beneficiary and owner of a life insurance policy on your spouse, even after you divorce. Negotiate for that right on any existing policies as part of your divorce.
If your spouse is adequately covered by life insurance, you want to make sure that your divorce settlement addresses the following:
- you are named as the beneficiary of any policy as long as you are due alimony or child support, even if he or she remarries.
- whether or not you will be listed as the owner of the policy.
- the way that any payment due you to cover existing child support and alimony obligations is calculated.
- the need to maintain the policy, and who is obligated to pay the premiums.
- the need for you to be notified if any premium payments are missed.
- how the insurance money would be disbursed. Insurance policies can be set up to pay benefits in one lump-sum or to make payments, through a trust.
- what happens to the remainder of the insurance policy, if any, once you've received the part that you're due.
- whether or not you have the right to assume any premium payments, once the insurance is no longer necessary to cover alimony or child support.
If your spouse doesn't have life insurance, you and your attorney can ask that he or she secure it as part of the divorce agreement. If you wait until after the divorce is final to try to secure insurance on your ex-spouse, you may find that he or she isn't going to be cooperative.
As difficult as it may be to think this way, your divorce is very much a business deal, full of financial negotiations. Planning for possible future scenarios is important, because any financial mistakes that you make now — like forgetting to address a way to insure that you receive the child support and alimony you are owed even if your ex-spouse dies — can impact you for years to come. Talk to your divorce attorney for more advice.