When life changes, it is important to review your insurance information. This also includes at the time of divorce. Not only is it important to insure yourself to cover your obligations, it can actually be required.
Take for example a client of mine, Dr. Martinez. I first met Dr. Martinez when he was finishing his medical residency and fellowship in orthopedic surgery here in Colorado. As a single person at the time, we took care of his disability insurance planning needs to protect his potential income.
When he graduated from his medical fellowship in foot and ankle surgery, we increased his disability insurance to cover his new income and to cover the cost of paying back his $300,000 school loan debt. A few years later, he got married, bought a large house in the suburbs and had two children. At that time, we added life insurance on him and Mrs. Martinez.
A few years later, Dr. Martinez called to inform me that he and Mrs. Martinez were getting a divorce. He put me in touch with his divorce attorney to handle the insurance. As part of their divorce agreement, Dr. Martinez was required to carry both life and disability insurance to cover his alimony and child support obligations. I worked closely with Dr. Martinez’s attorney to ensure that his insurance was not only set up properly for this purpose, but to ensure the wording was correct for the beneficiary designation and ownership of the policies.
I had another recent situation where a high profile actor contacted me who was going through a divorce. In this situation, his agreement required his soon to be ex-wife to purchase life and disability insurance on him. The ex-wife took out a life and disability insurance policy on the actor, paid the premiums and was the beneficiary of the proceeds. She has an insurable interest if something happens to him that she still receives the money if he were to die or couldn’t work due to a sickness or injury. They had built up a lifestyle that required a significant amount of obligations to be paid to the ex-spouse.
For more information about life and disability insurance as part of a divorce agreement, contact Set for Life Insurance today!