While having a life insurance policy is always a good idea if you're married and/or have children, it's by no means legally required. That can change, however, in the event of a divorce. The following is life insurance guidance for individuals who are questioning what they should do with their life insurance policy as they prepare for divorce.
What to consider
Resist the urge to immediately change the names of your beneficiaries on your life insurance policy once divorce proceedings have begun
Even if you do not have minor children, you may be legally required to maintain single person life insurance on yourself for the benefit of your ex-spouse. Wait until your divorce is finalized to take such action, and be sure to seek life insurance guidance from your divorce attorney and/or life insurance agent who can help you make the appropriate changes.
In the event of a divorce where minor children are also involved, the noncustodial parent might be required to take out a life insurance policy for the benefit of their ex-spouse and/or minor children
This course of action is to ensure that your ex-spouse/children receive sufficient alimony/child support in the event of your untimely death. In such cases, the noncustodial parent is usually responsible for paying the life insurance premiums. Be sure to go over your divorce agreement carefully with your lawyer.
If there is a life insurance policy stipulation in your divorce agreement, you will most likely have to maintain such a policy as long as alimony or child support payments are required
If you have minor children, a term life insurance policy may provide sufficient coverage until they reach adulthood. Be aware that in some cases, the amount of life insurance you are required to maintain can also be stipulated in the divorce agreement.
If no such stipulation is made, be aware that if you change your life insurance policy beneficiaries to your minor children, they cannot directly receive the death benefit if they are considered minors in their state of residence
After you divorce, take the time to name a custodian for any minor beneficiaries on your life insurance policy, whether it be your ex-spouse or another trusted friend or loved one.
You and your ex-spouse may want to consider insuring each other if children are involved
If there is no stipulation in the divorce agreement, you and your ex-spouse should privately discuss purchasing or continuing to maintain life insurance policies on each other's lives for the benefit of your minor children. Even if you are the non-custodial parent providing child support payments, if you suddenly had to assume full-time responsibility for your children, it could represent a dramatic increase in your daily expenditures.