5 Life Insurance Mistakes Women Make During a Divorce

Going through a divorce is a brutal process. Nobody, other than the lawyers, like divorce. It is something that you never wanted and certainly never planned for, and if not done properly it can cause financial problems for years to come.

Not much time or energy is normally spent on the topic of life insurance during a divorce, and often the advice given by the attorneys is inadequate at best. There are the 5 big mistakes that women make when it comes to life insurance and divorce.

1 Not Demanding Sufficient Coverage

Lawyers are not financial planners and generally don’t have any idea how to calculate how much life insurance coverage is needed. Because of this they often recommend an amount of life insurance that is too low.

When calculating how much life insurance your ex should be mandated to carry, there is a lot to take into consideration. Maintenance (alimony), child support, any joint debt and funding for the kids education must all be included in the calculation.

In many cases your ex may be mandated to provide health insurance for the children and possibly yourself. If he dies, these expenses will become yours. Make sure they are included when determining the amount of life insurance he will need.

Spend some time writing down everything your ex helps pay for. In addition to child support, does he contribute towards things like dance lessons, summer camp and orthodontics? Does he provide a car and insurance for college age children? You need to take all of these things into consideration because if he dies, all of those expenses will belong to you.

If you need help in determining how much life insurance is appropriate, contact a qualified life insurance agent for a free consultation.

2 Forgetting to Update the Beneficiaries

One of the more common life insurance mistakes women make when they get divorced is forgetting to update all of their beneficiaries. Your divorce stipulation may mandate that you carry life insurance and name your ex as beneficiary, or it may require you to name the children as beneficiaries with your ex as trustee. In either case make sure that you list it exactly as stated in the stipulation. If you and your ex already have life insurance policies and you have agreed to use those to satisfy the divorce decree, you still must update the beneficiary designations.

Many stats now have divorce revocation laws which can wreak havoc if your beneficiary designations are not listed correctly.

3 Forgetting About Your Life Insurance through Work

Don’t forget to update the beneficiary designations on all of your insurance policies. You probably have more than you realize. You need to update the life insurance you have through your employer. If you have an accident policy, critical illness or cancer policy they will have beneficiaries listed. If you volunteer for the fire department or local ambulance corps, they may provide life insurance where you have named your ex as beneficiary.

While you’re at it make sure that you update the beneficiary of your pension plan, 401(k) and IRAs.

We have seen many people put off these tasks, planning to do them when things settle down. But time slips by and your memory plays tricks on you. Many times we’ve asked people who have been divorced for years, even decades to verify the they updated their beneficiaries when they got divorced. They are always certain that they did, but many times when we verify them we find that they didn’t. Their ex was still listed.

4 Not Thinking About Disability

In most divorces where there is maintenance or child support, the issue of life insurance will be addressed in the stipulation. But did you know that the odds of a working man becoming disabled are much greater than of him dying?

What will you do if you are dependant on child support form your ex in order to make ends meet and he becomes disabled? Suddenly he has no income and your child support payments stop. This risk is higher if your ex spouse is self employed. Having adequate disability insurance can guarantee that the financial support you need continues even in the event of an accident or major health problem.

5 You Own The Wrong Policy!

Probably the most common mistake women make when it comes to divorce and life insurance is that they control the wrong policy. They own the policy on themselves, and the ex owns the policy on his life. This is dangerous and must be addressed.

Any life insurance agent who has been in the business for more than a few years has experienced this. A call comes in from a somewhat panicked man who says he has to have a quote on life insurance right away. His attorney has just told him that everything is ready to finalize his divorce; he just needs to show that he has gotten the life insurance that he is required to have.

He runs to the nearest agency he can find and applies for life insurance. He’s even willing to pay more if he can get a policy express issued without requiring an exam. He gets the policy, his attorney files all the paperwork and he eagerly awaits confirmation that his divorce is finalized.

Once he gets confirmation the divorce is final, he stops making payments on the life insurance policy. His ex thinks he has the policy and she is the beneficiary, but there is no life insurance policy in force any more. In the best case scenario she realizes this and has to take him back to court. In the worst case scenario she does bit find out about this until after he has died.

It is crucial that you own the policy on your ex’s life. Demand it. This way if he stops making the premium payments you will know about it before the policy lapses. Also, if you are the owner he can’t change the beneficiary or lower the coverage.

With a little effort you can avoid these 5 Life Insurance Mistakes Women Make During a Divorce.

Marcy Tooker

The Tooker Agency

Riverhead NY

631-502-0000

marcy@thetookeragency.com