Divorce is one of the most stressful and heartbreaking events that a person can endure. Divvying up property, money, and sorting out child custody are among the most daunting tasks, yet few realize that life insurance is an integral portion of the divorce settlement. It enables both parties to ensure they have the financial support for their dependent children, especially if the worst should happen. Fortunately, there are many ways to handle the situation, from amending your existing policy to finding a new life insurance policy on Health IQ. No matter what you decide to do, you can take one of the aspects off your plate and attempt to get back to a normal life.
Designating the Owner of the Policy
When the divorce proceedings begin, it’s important that you designate who’s going to become the owner of the policy. This becomes even more important if dependent children are involved. In most cases, the custodial parent is the ideal choice as the owner of the policy simply because they have the best interests of the children at heart. However, this isn’t always the rule. The owner of the policy has the right to name beneficiaries, so in an amicable divorce, it’s not as big of a deal as it is with a hostile split.
Changing the Beneficiary
Life insurance policies from Health IQ are specifically designed to keep your spouse and children financially independent if something should happen to you. As such, most policies name the spouse as the beneficiary of the policy. However, there are few reasons to keep an ex-spouse as a beneficiary, especially if the divorce is all but acrimonious.
The difficult part of this is that the owner of the policy typically has power over who’s named as beneficiary, and can change it as he or she sees fit. That’s why it’s important to determine if your life insurance policy is revocable or irrevocable. In the case of an revocable policy, the owner can change the beneficiary based on the conditions named in the policy. Most of the time, this means they can freely change it to whomever they want. An irrevocable policy is the opposite, meaning that the owner cannot change the beneficiary.
One important thing to note is that a divorce settlement can protect the spouse and keep them as beneficiary if ordered by the court to comply. This is just one aspect of your Health IQ life insurance policy that you should discuss with a qualified divorce attorney.
Cashing Out Your Policy
Some life insurance policies take your monthly premiums and roll them into an interest-bearing account. In most instances, you can get rid of the policy and elect to take the cash value that’s in this account. Other settlements take this cash value and require the policy holder to pay half of the amount to the spouse while retaining the policy in their name.
Another important determination in cashing out your Health IQ life insurance policy is whether it’s term life insurance (short-term) or permanent, whole life insurance (long-term). While term life insurance has no real cash value, it’s possible to sell larger policies to groups such as hedge funds, then split the proceeds with the spouse. Whole life insurance is a desirable asset, so you can cash it out or see what the court says as far as a divorce settlement. For tax purposes, you may also want to file a 1035 exchange. This allows you to roll the funds from a life insurance policy to an annuity or another life insurance policy without having to pay taxes.
If You Have Custody of the Children
When children are part of the equation, the custodial parent should make certain that they maintain ownership of the policy. This is especially true if there’s a lack of trust between the two parties, or one party expects the other to disappear or start a new life somewhere else without concern for child support or alimony. Because child support helps take care of the kids, save for college, and pay for living expenses when one spouse disappears, so does the income.
To counteract this type of situation, the parent with the kids should maintain a life insurance policy on their ex-spouse. This acts as a buffer and way to insulate themselves from the lack of income the other spouse previously contributed. Make sure to make the payments on time, as a Health IQ policy can become null and void if the payments lapse.
Life insurance and divorce are two topics that few want to deal with regularly, but now you know the ins and outs of the process, you’re more ready than ever to tackle anything thrown your way. If you decide to get a new policy, make sure to browse the policies from Health IQ. With affordable premiums and terrific coverage, you’ll enjoy a bevy of options to suit your life insurance needs.