If you’re negotiating a divorce, or have been through a divorce and are receiving maintenance payments (and/or child support), there is one asset you must have- it’s Life Insurance. But not on you, silly, on your ex!
The reason life insurance is so integral is because it ensures your well-being. If you rely on that payment, for whatever reason, then you know it would be devastating, perhaps even catastrophic, if you lost that income due to the death of your ex.
I’ve seen real-life scenarios reinforcing this recommendation. In fact, one of them hits real close to home. A good friend of mine, who has two young children, was divorced and receiving child support from her ex. She was working part-time and going back to college to finish her Bachelor’s degree in hopes of increasing her income potential. Despite his young age (not quite 40 years old), he died in his sleep. So many financial-related issues resulted from this situation, but I will focus on the impact caused by not having life insurance to cover these payments. As stated above, my friend was working only part-time so she could go back to school full-time. She is now missing his financial support to provide for their children and even though she is receiving Social Security payments, it’s not enough. Plus, now she won’t have his help to put the kids through college eventually. This makes it more than just an immediate hit, it also has long-term consequences.
I’ve seen situations where life insurance policies were put in place at the time of divorce and yet they lapsed prior to death. At the time of death the unassuming ex-spouse came knocking on the door of their ex’s current spouse looking for their money only to find there isn’t any. I mentioned this situation in another blog post . To further ensure the policy is inforce at death, you might consider becoming the both the owner of the policy as well as the beneficiary. This way, because you own the policy, and you are responsible for paying the premiums, it is impossible for the policy to lapse due to non-payment without you knowing. Of course that means you will be on the hook for paying the premium, but if you are in the middle of the negotiating stage I encourage you to include the premium in your maintenance payment request, so the premium doesn’t put more onus on you. If you can’t do that, then be sure to complete the proper forms with the life insurance company to be notified if a payment was missed, that way you can work to rectify the issue before it becomes too late.
The moral of this story is that you need to take control of the situation- don’t set yourself up to be a victim. You might think doing this means you don’t trust your ex, or it might seem greedy. It’s not a matter of trust. Overtime even the most well-intentioned people forget why they own what they have. Or they unintentionally lapse the premium because the bill got lost in the mail. And if you think taking this extra step might seem greedy, please think otherwise. If you rely on the maintenance or the child support then it’s clear that it’s more a matter of necessity than anything else.