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Life Insurance after Divorce? M ost people buy life insurance to help family members stay financially secure after the policyholder’s death. Yet, when a marriage ends, the topic of life insurance is too often overlooked. These five tips can help you and your soon-to-be-ex discuss important changes to your policies before you sign the papers: Read the divorce agreement carefully. “Life insurance policies are often used to secure alimony and child support payments,” says Steven Weisbart, Ph.D., senior vice president and chief economist at the Insurance Information Institute. Before you sign any documents, make sure they meet your needs and that you’ll be able to comply with them. Divorce agreements are legally binding and can be difficult to alter. Discuss duration of coverage. The time frame for any obligatory life insurance coverage varies, often depending on the length of alimony and the ages of the children. If you’re purchasing insurance to protect a child financially, look into affordable term life or decreasing term life plans with coverage that expires when the child support obligation ends. Decide who will pay the premiums. Having your ex-spouse pay the insurance company may be convenient, but if you’re concerned about the possibility of default, ask your ex to pay you and then pay the premium yourself. Or, have your ex add you to the policy record so that you may receive duplicate copies of billing and lapse notices. “The consequences of your ex not paying you are less than if he or she doesn’t pay the insurance company,” Weisbart says. “Failing to pay the insurance company could cost you the policy.” Re-designate beneficiaries. Depending on the divorce settlement, many couples will rename their beneficiaries from each other to their children. In some states, probate laws automatically disqualify a former spouse from receiving life insurance proceeds unless the insured re-designates their ex-spouse after the divorce. If the children are minors, consider appointing an adult custodian to receive and handle the benefits on their behalf. Be sure to specify when the money will be transferred to the children and the percentage each child is to receive, Weisbart says. And keep in mind that beneficiaries cannot be re-designated after the insured’s death, so it’s critical to keep the policy up to date. Determine how much coverage you’ll need. Examine what your ex-spouse’s financial situation would be like if alimony and/or child support payments ended. Talk with your State Farm® agent and divorce attorney to arrive at a specific amount. The Insurance Information Institute offers more information on reviewing insurance coverages during a separation or divorce. Carl Schindler, LUTCF, CSA Agent, State Farm Insurance Carl Schindler is a 41-year State Farm Insurance agent in Morgan Hill. His agency has been voted #1 in Morgan Hill for the past 5 consecutive years. He specializes in Auto, Homeowner’s, Life & Disability Insurance. Visit StateFarm.com/ CarlSchindler or call (408) 779- 6969. Are You Financially Prepared For The Death Of Your Spouse? When developing financial plans, couples need to consider what will happen when one of them passes away. The Census Department reports that in 2009, 2.4 percent of all men were widowed and 9.3 percent of all women were. After age 65, 41.3 percent of women were widows. The death of a spouse isn’t a theoretical number: It’s something that could very well affect your family. As part of your financial plan, you should consider what will happen to your family’s income and expenses when one spouse passes away. If the spouse was working, that income will be lost; if the spouse was retired, the pension could be. Social Security benefits may make up some of the lost income, especially if there are minor children in the household. Expenses may go down, but don’t depend on it. If there are minor children, then childcare expenses are likely to increase with only one parent in the household. If the family received its health insurance from the deceased spouse’s job, then those costs may rise. On the other hand, some of the deceased’s expenses will be eliminated. With retired couples, research by the Department of Health and Human Services on widows shows that household costs decreased about 20 percent when the husband passed away; in some cases, her income decreased by 50 percent or more when her spouse’s income was gone. Careful planning for savings, pension elections, and life insurance may help your family avoid a financial crisis on top of personal sorrow. The proper option will be different for each couple, but the first step should be a discussion about what would happen should tragedy hit tomorrow. G M H T O D A Y M A G A Z I N E MARCH / APRIL 2015 gmhtoday.com 77