Even amicable divorces in Ohio cause financial hardship when starting and maintaining two households. With all that’s happening in the aftermath of the divorce, it is easy to forget life insurance. However, it is essential to consider it since it can protect your assets. Here are a few things you should know about how divorce affects life insurance.
Handling life insurance after divorce
Couples usually buy life insurance to cover financial responsibilities. Even after going different ways, they still may have these obligations. You must consider existing policies during a divorce to ensure existing or anticipated debts and other financial responsibilities are covered.
You want to account for all life insurance policies. This requires you to gather documentation related to life insurance, current assets and liabilities. In some states, each party is responsible for providing an Affidavit of Insurance Coverage at the start of a contested divorce.
Various factors may be looked at when determining how to handle the policies. For example, divorcing spouses may terminate cash value policies and divide the money. Those with term life insurance may decide to keep the policies and be beneficiaries and owners of each other’s policies.
Potential issues
One problem that may arise with an insurance policy during a divorce is one spouse changing it without alerting the other. One way to solve this is to own the policy, giving you complete control over naming beneficiaries and payments. Or you receive third-party authorization on the policy to alert you when someone makes changes.
Changing needs can present life insurance problems after divorce. Things like the time that has passed since the divorce, alimony payments and adding other beneficiaries may factor into changing insurance obligations.
Don’t let life insurance during divorce be an afterthought. It is a crucial component of any divorce settlement.