Life Insurance and Divorce Settlements

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In the United States, there is one divorce approximately every 36 seconds. That’s nearly 2,400 divorces per day, 16,800 divorces per week, and 876,000 divorces a year.

With such staggering statistics, you may be asking if it’s possible to buy a life insurance policy on your ex-husband or ex-wife. The short answer is yes. The long answer? It depends.

This article will go over all the nuances when it comes to life insurance and divorce, including how much would it cost. Let’s dive in!

Related: Finding the cheapest term life insurance rates

Divorce and Life Insurance

In many divorce cases which include requirements for child support or alimony, it’s a well-known practice that the supporting spouse will carry a life insurance policy should the unexpected happens.

This, of course, safeguards the children and the other spouse by giving them means to maintain their lifestyle should the supporting spouse passes away. The type of life insurance, the length, or face amount depend on what the policy was intended for, and it should be noted as a requirement on the divorce decree.

Quick Tip: When negotiating your divorce agreement, you, the custodial parent, want to make sure you are the policy’s owner. The owner of the policy has the right to change beneficiaries and even get notified if the policy lapses. You also may contemplate paying for the coverage (unless the court has ordered the other spouse to pay) so that your policy is maintained accordingly and doesn’t lapse. After all, it’s a small price to pay to make sure your obligations will be paid in the event of death.

Reasons for Getting Life Insurance on Ex-Spouse

First, for someone to buy life insurance on someone else, they must prove insurable interest. Insurable interest is a reason to purchase life insurance on someone because you could encounter a financial loss if they pass away. To have a reason, you must first have some type of a connection or a relationship to the insured.

Second, you must show that you will suffer financially if the insured dies. If your spouse is the higher earner who is paying alimony and child support and you depend on it, this is all the proof you may need.

This brings us for the reasons you can carry life insurance on your ex:

  • Alimony payments
  • Child support
  • Mutual bills such as a mortgage or other debts

Tip: Yes, you can buy life insurance of your ex-spouse, provided you can prove the conditions above.

Protect Your Children—Both of You

Most divorces leave a bitter taste for both parents. The biggest challenge is that one family turns into single parents who take weekend custody turns with children. My point is when you think about all the things that you can’t agree with your spouse about and all the fights in between, you both need to make sure to agree on one thing: buying sufficient life insurance coverage so the children can be protected if the unexpected happens.

A simple way of doing this is to multiply your yearly income by the years until the child becomes 18. If he is three years old now and you are making $40,000 per year, then a $600,000 policy will be sufficient. The custodial parent also needs to insist on an adequate policy with the children in mind instead of contending for no reason other than to annoy the other partner.

End of marriage doesn’t translate into the end of marital responsibilities, and when there are children in the middle, things can get out of control.

Best Policy Type on Ex-Wife or Ex-Husband

Term life insurance is the best type to buy when settling a divorce decree. The reason lies in its lowest rates and the largest amount of coverage. However, each case is treated differently based on the policy’s purpose and both parties.

For instance, if you only need to cover child support until the child turn 18 years old, and he is eight years old now, term life would be a good option. However, what if the court ordered you to cover alimony for decades or longer? You might need a permanent solution.

Do I Have to Take an Exam?

If you buy a traditional term life insurance, you will have to undergo an exam as part of the underwriting process. Additionally, you can expect to have a phone interview and public database searches such as MVR, MIB, and prescription history. If, however, you want to skip the exam, you can opt for a no-exam policy, but you will pay increased costs when compared to a fully underwritten policy.

How Long Does It Take for the Policy to Go into Effect?

It depends. If you bought a traditional term life which requires a medical exam, the underwriting process could take anywhere from two weeks, if you are in good health, to eight weeks if you’re health isn’t intact. Moreover, if the underwriter decides to order medical records, it may be prolonged even more, as an applicant’s medical records a necessary part of issuing or denying a policy.

If you apply for a no-exam policy, you could get the policy in a matter of minutes to a few days—provided, again, that you are in excellent health. It’s worth repeating that no-exam policies cost more than their counterpart (with the exam). If you want to save money, do not skip the exam.

What If I Can’t Qualify for Coverage?

If you can’t qualify for a life insurance policy due to significant health issues, you may get a waiver from the judge. Don’t consider this as a win. Your children’s future may be at stake here.

How Much Does It Cost to Buy Life Insurance on My Ex?

Below are the rates for term life insurance and term life with no-exam. Keep in mind that rates are for healthy individuals without pre-existing conditions. Your prices may be different based on your health history.

Term Life Insurance Sample Monthly Rates

20-Year Level Term Male

 AGE$100,000$250,000$500,000$1,000,000
 25$8.71$12.89$19.56$31.12
 30$8.81$13.05$19.99$32.83
 35$9.07$13.59$20.86$35.01
 40$10.83$17.80$28.75$51.56
 45$15.58$27.78$48.56$88.66
 50$20.74$40.44$73.51$136.46
 55$29.93$63.27$117.31$226.16

20-Year Level Term Female

 AGE$100,000$250,000$500,000$1,000,000
 25$8.10$11.38$16.57$24.27
 30$8.19$11.61$17.30$25.98
 35$8.31$11.96$17.92$30.27
 40$9.83$15.43$24.68$42.57
 45$12.78$22.43$38.40$69.13
 50$16.46$30.90$54.88$100.60
 55$22.49$47.04$85.49$163.50

No-Exam Sample Monthly Rates

20-Year No-Exam Male

 AGE$100,000$250,000$500,000
 25$9.50$12.89$19.56
 30$9.50$13.12$19.99
 35$9.72$14.75$22.68
 40$11.57$18.71$32.61
 45$17.14$27.78$48.63
 50$23.59$45.86$83.33
 55$36.31$79.76$151.09

20-Year No-Exam Female

 AGE$100,000$250,000$500,000
 25$8.67$11.39$16.57
 30$8.75$11.65$17.30
 35$9.07$11.96$17.92
 40$10.49$15.34$24.68
 45$13.79$22.43$38.46
 50$19.31$33.25$60.41
 55$26.76$51.65$93.13

*All rates quoted on this page are for a super-preferred healthy individual who does not use tobacco. Monthly rates are updated as of Jan 2019 and are subject to underwriting approval.*

Bottom Line

Try not to procrastinate getting life insurance if a court has ordered you to do so. Many keep putting this off by waiting until the last minute and risking buying a more expensive policy (because they need it right now) or, worse, not getting the policy in time and dealing with extensions, attorney fees, and other expenses.

Lastly, if you aren’t in good health, don’t shop by yourself. Instead, enlist an experienced broker to help you choose the best plan based on your unique circumstances.

You can go ahead and use the form on the right-hand side to get instant term life insurance quotes from top-rated insurers.

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Feb 5, 2019 | Categories: Types of Life Insurance | 0 comments

About the Author: Ron Attias

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