Expert advice on protecting your assets in difficult timesLife insurance, more than most things you buy, relates to
circumstances of your life. You buy life insurance to protect your family from financial loss stemming from your death. You tie amount of your life insurance to money your family will need to provide an income, pay off debts, put children through college and cover financial commitments.
But what happens to life insurance when you’re about to dissolve your marriage? How do you deal fairly with a soon-to-be ex-spouse, yet still make sure you have coverage for future? Is there a way to provide for adult children of a previous marriage without going broke -- especially if you have children through a second or third marriage?
Here are a number of considerations you should be aware of:
- Don’t assume that your insurance agent or company knows about your circumstances. If you don’t change your beneficiary, your former spouse may receive proceeds of your policy upon your death. If designation simply reads, “husband of insured” or “wife of insured,” and there is no new spouse, secondary beneficiary receives proceeds.
- You may be able to transfer ownership rights of policy as part of a property settlement or to ensure continuation of alimony payments. Your ex-spouse may not press as hard for more support or a greater slice of an ongoing pension if he or she remains designated beneficiary on a permanent life insurance policy. Of course, you need to ensure that your policy remains a valuable asset by keeping up premium payments.
