Atlanta Financial Blog

Should I Maintain Life Insurance on My Ex-Spouse? How Much Should I Purchase and How Do I Make Sure it Stays in Place?

Cathy C. Miller, MBA, CFP®, CRPS®, CDFA™
August 1, 2018

The primary purpose of life insurance is to fill a financial “gap” that you might face upon the death of someone you depend on financially. While the need for life insurance is generally obvious with a married couple, many people overlook the need for life insurance on an ex-spouse. If you receive alimony and/or child support, life insurance can provide critical protection if your former spouse were to pass away. A well-constructed settlement agreement will address this need and generally require the former spouse to maintain the coverage at his or her expense. The amount of coverage needed can be calculated by your advisor to ensure a funding amount that will cover any outstanding obligations.

So let’s assume your settlement agreement requires your former spouse to keep life insurance coverage, how can you make sure it stays in place? Ideally, your agreement should require that you be named as the owner and beneficiary. As the owner, no changes can be made to the beneficiary without your knowledge and approval. Alternatively, at a minimum your agreement should require that you receive duplicate policy notices, so that you will be informed if the policy is past due, lapses or a beneficiary change is made.

If your agreement didn’t require your former spouse to carry life insurance for your benefit, is there anything you can do now? Obtaining the coverage yourself is a possibility since you have a legitimate insurable interest, but the insured would obviously need to agree to be underwritten for the new coverage. Discuss your concerns with your advisor to assess how much exposure you have and to discuss strategies for shoring up this important risk.

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