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Life insurance issues when going through a divorce

When the first quotes come in and you look around, the majority see a settled domestic arrangement and steady jobs. Taking decisions about what life cover to buy, you therefore assume this happiness will continue indefinitely. Unfortunately, the statistics are against you. The majority of marriages and civil unions end in separation. This is rarely a time when rational thought prevails. More often, emotions run high and the partners see this as a chance to take their revenge for incidents long in the past. This means decisions about the existing life cover may not be taken or poor quality decisions may be taken. The rule should always be: no matter how you may feel about your partner, do not let the children suffer. Here are a few simple rules to follow:

The standard when couples buy a policy is for each to name the other as the beneficiary in the even of death. The first impulse to cancel the policy should be resisted. You may have been fitter and healthier when the policy was taken out. If you cancel and look for another policy now, it is probable the premium rate will be significantly higher. The best decision is therefore to change the nomination on the policy to the children. Even if you are not around, you have still provided for them. Some courts actually include this as one of their standard orders when making provision for children.

Even if children are not involved, there are often alimony issues. Courts can sometimes favor an order for a financially dependent spouse to continue as the beneficiary in return for a lower rate of alimony during life. It is therefore better to do a full review of the life insurance provision as you have it. As the divorce will have produced a significant change in circumstances, you may need to change the extent of the cover to fit your new personal circumstances. If you asked for riders when the policy was written, they may no longer be relevant. Similarly, if you are facing a court order to provide life insurance cover, a Return-of-Premium term policy may be the best answer, i.e. if your spouse dies before you, you can recover the premiums you paid when the term ends.

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