Life Insurance and Divorce

Maintenance payments stop upon the payer’s death. A simple way to protect future payments is to have the divorce decree stipulate that life insurance be carried on the life of the payer to replace maintenance in the event of the payer’s death. It’s recommend that the recipient own the life insurance policy and make the premium payments. This prevents any changes in the policy without their knowledge.

Another option is to have the recipient be an irrevocable beneficiary. This prevents any changes in the policy without their knowledge. Consider this hypothetical scenario: Erin was receiving $400 per month in spousal support from her ex-husband Michael. The court had ordered Michael to carry life insurance on his life, payable to Erin as long as maintenance was being paid. After three years, Michael was tired of making the insurance payments so he stopped and the insurance was canceled. Nobody knew about it until one year later. Michael was in a car accident and died two weeks later of complications from his injuries. There was no life insurance. Yes, Michael was in contempt of court, but it didn’t make any difference.

If a new policy is to be purchased, it should be done before the divorce is final. In anther example, Robert agreed to buy a life insurance policy to insure his maintenance payments to Carla. After the divorce was final, he applied for the insurance and took his health exam. He was found to be un-insurable. If Carla had known this before the divorce, her lawyer would have asked for a different settlement. By then it was too late.