If your ex-spouse is being ordered to pay child support or spousal support then you have one more step to take after your divorce decree is signed. You need to seriously consider taking out a life insurance policy on your ex.
This is counter intuitive. Most people think they can only take out a life insurance policy on a spouse. But you may take out a life insurance policy on anyone so long as their life and death has a financial impact on you. Someone who is paying you child or spousal support certainly qualifies.
But there are a few things you should know.
You’ll need your ex-spouse’s consent.
This is probably the biggest reason why a lot of people don’t think to take this vital step. A lot of people want to be absolutely done with their spouses from the moment the ink is dry on the divorce papers.
But if you have children you’ll soon find out it’s going to be all but impossible to avoid talking to your spouse anyway.
Why can’t you take out the policy without your ex’s consent? For one thing, he or she will have to provide the insurer with medical records, and may need to take a medical exam. You may be able to make this easier on you both by seeking a policy that doesn’t require an exam.
To avoid making this awkward, you could try to work in an agreement that your ex will provide this consent as a condition of your divorce agreement. Courts may also simply order that your ex take out a life insurance policy with you and the kids as beneficiaries, which is a win for you, as you’ll get the benefit of coverage without paying a premium.
On the other hand, if coverage lapses you probably won’t know about it, which means you could be in for a nasty surprise if your ex isn’t paying his or her bill. The same thing often happens when an ex gets assigned debts he or she can’t or won’t pay. It may simply be safer to take out one of your own.
You may be able to use an existing policy.
If you already had a policy on your spouse it may be possible to keep it, if you owned it and pay the premiums on it. You just want to make sure your ex isn’t a beneficiary of the policy. Switch it over to you and the children instead.
In this case you don’t have to do anything. Keeping an existing policy does not require your spouse’s consent. It was already given.
Of course, sometimes the cash value of insurance policies becomes divisible marital property in the divorce settlement, which is another issue altogether. This option would assume your policy was unaltered by the judgement.
How much coverage do you need?
This is a tricky one, and you’ll probably want to speak to your agent about it. However, chances are you’re not taking this policy out for life because for the most part child support and alimony payments don’t last for life.
Your child support payments are going to last 18 years at most. Your alimony payments may be permanent, but permanent alimony is rare.
However, there’s one thing you should know. If you took out a policy while you had insurable interest and the insurable interest stops, you don’t have to give up the policy. You can choose to keep it as long as you continue paying premiums. While it may seem a little morbid to keep paying premiums on an ex in the hopes he or she will die before you do and give you a big payout, it is a valid financial choice you can decide to make.
Why take chances?
It would be a shame to fight hard for a decent alimony payment only to lose it to your spouse’s death. Presumably if you need spousal support at all you are going to need it if your spouse dies, too. So don’t take chances. A life insurance policy doesn’t have to be expensive to be effective, so be sure to work these payments into your new monthly budget.
If something does happen, you’ll be glad you did.