The Interaction Between Divorce And Life Insurance

If you are getting divorced, you may have to purchase a new life insurance policy or maintain your current life insurance policy.

Generally, life insurance is to provide financial security in case of your death.  In a divorce, a life insurance policy is designed to either: (1) replace the amount of child support; or (2) replace the amount of spousal maintenance (alimony).

If you die, your children will still need financial support, a life insurance policy will help to provide that financial support. Both parents, including the parent who has custody of the children, may be required to obtain life insurance.

Typically, in a divorce, you only have to provide life insurance to replace your child support obligations. The benefit amount of the life insurance coverage will depend upon the age of the children and the amount of child support being paid. In some cases, the benefit amount will remain the same until the obligation to provide child support ends. In other cases, the benefit amount can decrease as the remaining child support obligations are reduced. If there are two or more children, the benefit amount can be reduced as each child reaches the age of 21 years of age.

Although, it is not typically required, in some divorces, you may also have to provide life insurance to take the place of spousal maintenance. The benefit amount will vary in each divorce and will usually depend on how much spousal maintenance you would have paid if you were still alive.

Here are some examples:

Example 1:  The monthly child support obligation is $1,000.00 per month for one child.  The child is 10 years old and child support will end when the child turns 21 years old.  The yearly child support obligation is $12,000.00 and the total amount of child support will be $132,000.00.  The life insurance benefit could be set at $150,000.00.

Example 2: The monthly child support obligation is $1,000.00 per month for one child.  The child is 8 years old and child support will end when the child turns 21 years old.  The yearly child support obligation is $12,000.00 and the total amount of child support will be $156,000.00.  However, the divorce agreement states that you can reduce the amount of life insurance each year by $12,000.00.  The life insurance benefit could be structured so that it begins at $160,000.00 and each year is reduced by $10,000.00.

Example 3: There are three children.  The monthly child support obligation is $1,500.00 per month.  The oldest child is 15 years old, the middle child is 12 years old and the youngest child is 10 years old.  The yearly child support obligation is $18,000.00 and the total amount of child support would be approximately $165,000.00.  The life insurance benefit could be structured so that it begins at $175,000.00 and when the oldest child turns 21 is reduced to $50,000.00.

In some rare cases, life insurance will not be required.  Typically, this is when the child support amount is very low, the parents previously did not have life insurance because they could not afford it or when the parents did not have life insurance coverage because of their medical history.

In a divorce, typically the children are named the beneficiaries of the life insurance policy and the other parent is named the custodian (or the trustee).  The obligation to maintain life insurance policy will usually end when the parent’s child support obligation ends.

Most parents do not have an issue with providing a life insurance policy for the benefit of their children.  They understand that in the unlikely event that they die, that their children need support.

The Badanes Law Office has helped numerous individuals with divorces and in understanding how life insurance interacts with child support.

If you need an attorney to represent you in your divorce, call David Badanes and the Badanes Law Office today at 631-239-1702 or email me at david@dbnylaw.com. The Badanes Law Office has offices in Northport and Garden City.

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