During divorce settlement negotiations, family law attorneys often include life insurance provisions to secure child support and alimony obligations in the event of the payor’s death. To ensure the payor is insurable and follows through with the coverage, these arrangements are typically finalized before the settlement agreement is signed.
A recipient spouse may request that the payor obtain insurance to cover agreed upon, or court ordered alimony and court ordered child support including additional child related financial obligations of private and college tuition, health insurance, child care and extracurricular activities. Life insurance may also cover other financial obligations such as outstanding joint debt including a mortgage held jointly by the spouses.
Since obtaining a life insurance policy requires the payor’s cooperation, it is critical to address this requirement during the divorce negotiation phase. The soon-to-be ex-spouse must not only consent to the coverage but also complete the application process and undergo a medical examination—requirements that are much easier to facilitate before the divorce is finalized.
Taking out a policy early in the process will confirm the payer is insurable, what it will cost, and any limitations on coverage so that the parties can negotiate alternatives as necessary. Say, for example, life insurance is prohibitively expensive or unavailable due to the payor spouse’s health or age. The parties can then make other arrangements during the divorce settlement negotiations such as giving the recipient a larger percentage of assets or deciding on another approach altogether to ensure the continued financial wellbeing of the support recipients.
In many states, including Wisconsin, statutes automatically revoke a former spouse’s designation as a life insurance beneficiary upon divorce. Consequently, the settlement agreement should require the policyholder to redesignate the support recipient as the primary beneficiary—specifically in their capacity as a former spouse—once the divorce is finalized. The agreement should also clearly define the policy’s details. As a further precaution, the recipient should provide the insurance carrier with advance notice of the divorce to establish a written record, ensuring that the beneficiary designation is properly updated following the final decree.
To ensure continued support in the event of the payor’s death and to avoid conflicts or delays in receiving insurance benefits, four actions are crucial:
- During divorce settlement negotiations, request that the payor of alimony or child support secure a life insurance policy naming the recipient as the beneficiary
- Include specific policy information in the divorce settlement agreement including the policy number and issue date, the insured name, the death benefit amount, the policy term, and the primary and secondary beneficiaries
- Update beneficiary designations after the divorce is finalized to reflect the beneficiaries name and note that they are the former spouse
- Send written notice by certified mail to the insurance company during the divorce process indicating that the parties are divorcing and that the beneficiary designation will be updated when the divorce is finalized. This provides protection should the insured die in the interim.
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Partnering with an experienced divorce attorney ensures your settlement agreement is meticulously crafted to address every critical detail, from asset division and support obligations to child custody. Protect your future—contact Jane Probst to discuss your case at 414-210-3135.