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Knowledge is power

Divorce and Insurance: A Basic Primer

As a veteran insurance broker with almost thirty years’ experience, one maxim has always rung true: KNOWLEDGE IS POWER. It has always been my goal to bring the best available resources, tools and information to bear so that my clients can make choices and feel secure that well-informed decisions are being made. When I have given my clients relevant and practical information about the products they could purchase to protect themselves and their families; decisions are made and insurance is put in place. I have provided my clients with important liquidity at times when it is crucially important. That’s what life insurance does. It keeps a family in a home for example, and helps maintain a lifestyle the family is counting on. Camp, school, college, vacations – all remain a possibility if an unexpected death of a primary earner occurs. It is my job to bring these potential unbearable risks to light when a client is facing a divorce. It is my goal to make sure that all scenarios are considered, and that possible financial and/or insurance solutions are offered and implemented.

I have seen many clients and friends get married over the years, and wish them a long happy life together. For many, it doesn’t end that way. Relationships and marriages don’t last and couples move toward separation and divorce.

The process can be emotionally overwhelming, scary even. Most of the fear is related to the idea of being alone, and of facing a future without the security that being a couple can bring. This fear also comes from the sudden awareness that you might not have a solid understanding of your family’s finances, or of your own for that matter. The recognition that your marriage is ending can be a crisis. A time like this is made even more fraught with the realization that you have no idea what you need financially over the short and long-term, and what is already in place. It has been my experience time and time again that people become immobilized with fear when they don’t have the information they need to ensure that their financial “house” is in order.

Unfortunately, fear can potentially affect your decision making. Perhaps because you get bullied or pressured by your ex-husband, wife or partner, opposing attorneys/mediators, etc. Or you end up making poor decisions about finances because you don’t have the relevant facts. If you rely solely on professionals without having your own idea about what you need (amount of income, child support, etc.) how can they be expected to get it right? It’s not helpful or useful when an attorney says,” Don’t worry about it, I have this.” As trusted as they are, as informed and experienced as they may seem; they are not part of your daily financial life. You must be part of the process. This is a crucial area that requires your input.

Understanding the role insurance plays in a divorce is vital to ensuring financial security and success. Knowing that just because the agreement has been drawn up, the numbers are all accurate and it seems that all parties are adequately provided for doesn’t mean all your work is done.

You are counting on your ex honoring the agreement. You need them to do so for you to sustain your current lifestyle and obligations – but, for example, what if they suddenly were unable to do so because they die? And what about your contribution specified in the agreement? Are you mandated to contribute to support of the family – what if something unexpected happens to you? What happens to retirement and/or education needs if the person who was required to put the funds away is no longer living?

The primary answer to these concerns is life insurance. Life insurance will protect all parties in the event an unexpected or untimely death occurs. The pieces of this puzzle are: How much life insurance? How long do you need the coverage? Who pays the premiums? Who is the beneficiary? Who owns the policy and why? All can be answered if you have the basic tools with which to gain an understanding of this OVERLOOKED FINANCIAL TOOL.

Below is an infographic briefly outlining the process one must go through to answer some basic questions about life insurance and its place in your divorce agreement negotiations. The content of this discussion should be examined at some point while the DIVORCE/SEPARATION agreement is being drafted. Considerations of cost, availability of coverage, etc. should be part of any decisions pertaining to the final divorce agreement. While coming to terms with your ex-husband, wife or partner regarding finances is one thing, ensuring that the terms are actually carried out is another. Consider covering all your bases by purchasing life insurance protection.

“The protection that life insurance provides should be a primary consideration when evaluating all financial aspects and terms of any binding written agreement. When moving through the difficult and stressful process of separation and divorce, knowing that you have done the very best that you can to ensure continued financial well-being of your family and/or business is paramount to truly achieving financial security and peace of mind. Don’t leave any stone unturned when taking into account how best to protect those involved, including you.

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