Life Insurance and your Divorce

    As you contemplate life as a self-sufficient single person after divorce, establishing your financial stability as quickly as possible is essential. Especially if you’re a single parent, life insurance should become an important part of your overall financial plan. Life insurance protects the financial wellbeing of your beneficiaries.

With so many life insurance options available from many different companies, it is important to sit down with a financial planner or insurance agent to carefully evaluate your needs. While you can perform research about life insurance online, it’s best to shop for life insurance by working in-person with a licensed agent who can address your unique situation.

The cost of life insurance will vary greatly based on your age, sex, current health, whether or not you’re a smoker, the type of life insurance you’re looking to acquire, the amount of coverage (level of benefits) you’d like, and a variety of other factors. Here are some tips to help.


1. Negotiate For Life Insurance As Part of Your Divorce Settlement,
Gail Van Dalen, vice present of marketing and sales support for Individual Life at The Prudential Insurance Company of America, one of the highest-ranked and most reputable life insurance providers in the country, explained, “Everyone has unique needs when it comes to life insurance. After a divorce, someone’s needs and the needs of their beneficiaries, such as their kids, will change based on their divorce settlement. The divorce decree might stipulate which parent needs to maintain life insurance and what level of benefits is required. This might be something your attorney should negotiate for during the divorce process.”

If someone already has life insurance that lists a former spouse as the beneficiary, this is something you might want or need to change. “The process for changing the beneficiary related to a life insurance policy is very simple. Call the insurance company and request the appropriate form. Once the form is signed and returned, the change to the policy’s listed beneficiaries will be finalized,” added Van Dalen. “If the beneficiary is a child, a trust should probably be set up.”  


2. Acquiring A New Life Insurance Policy.
According to Van Dalen, the question is not whether or not you need life insurance. The question is whether or not you have enough life insurance, based on a needs analysis performed by a financial specialist or insurance agent. The younger and healthier you are, the more affordable life insurance will be in terms of the ongoing premiums.

“Everyone should have life insurance. There are different types of life insurance that service different purposes. Term policies, for example, are exclusively for protection. Whole life insurance policies offer protection and financial accumulation. You need to sit down with an insurance expert and understand what your needs are. If you’re acquiring life insurance for protection, you need to know what you’re protecting and why,” said Van Dalen.

It’s important to understand that while a term life insurance policy will be significantly less expensive to acquire, when the term of the policy ends, say after 10 or 20 years, if the person being insured is no longer in good health, they might not be able to renew the policy. A whole life policy will remain in place for as long as you pay your premiums.

If you’re a single parent looking to protect your children using life insurance, consider all of their long-term expenses in the event of your untimely death. “We have found that women tend to be underinsured when it comes to life insurance. People seldom consider all of the costs associated with caring for and raising young children. Thinking about one’s own death is sometimes difficult, but life insurance is really about protecting your loved ones and providing what your beneficiaries might need should you not be there for them,” said Van Dalen. “Life insurance should be part of someone’s total financial plan.”

The American Council of Life Insurers (www.acli.com) offers an informative, seven-page, downloadable brochure, called What You Should Know About Buying Life Insurance. To obtain a free copy, visit www.pueblo.gsa.gov/acli/.  


SHOPPING FOR LIFE INSURANCE: 10 ESSENTIAL TIPS              

The following 10 tips will help you shop for an acquire the most suitable life insurance for your unique needs:  

1. Determine your ongoing and future financial needs.
Consider why you need life insurance. If someone depends on you financially, such as a child, calculating their future and long-term financial needs is important.

2. Determine what life insurance coverage you already possess, through your employer, for example.

3. Calculate how much life insurance you’ll need overall.
his is something an insurance agent can help you with, based on your current and future financial responsibilities. You’ll need to consider ongoing expenses related to your beneficiaries, as well as immediate expenses related to your funeral and estate, for example. As a general rule (although this will vary greatly based on your unique needs), having a life insurance policy with a benefit equal to seven to 10 times your annual income is typically sufficient.

4. Learn what's best for you.
Learn about the two different types of life insurance – permanent (whole life) and term life -- and determine which would be most beneficial based on benefits and affordability. There are pros and cons related to each type of insurance which impact people differently, based on their age, health, income, lifestyle, needs and other factors. Know what type of insurance you’re buying and why you’re buying it.