One topic couples often forget when making the decision to end a marriage are the insurance policies they owned or purchased during the marriage. In the upheaval of a divorce, child custody issues, choosing a family lawyer, and property division, it’s important to remember these important assets. Each party should look carefully at the cash value of the policies and who are designated as beneficiaries.
What type of policies should you be looking for?
Health and Life Insurance: The most important are life and health insurance because they are the policies most commonly involved in child support and alimony orders from the court.
Disability: A close second in importance is disability insurance, although it’s less commonly a part of a divorce order.
Homeowners: Homeowners (sometimes known as “hazard” or “liability”) insurance, as well as renter’s insurance, is important to account for because it safeguards the parties residences which are often the major assets in a divorce.
Automobile: Finally, auto insurance is not only required by every state but also important to maintain as vehicles also become important in a division of assets.
A few definitions may also help when reading a policy:
Insured Party: this is the person whose life or property is the subject of an insurance policy.
Policy Owner: this is the person who owns the policy, and not necessarily the insured party. An example might be parents who own a life insurance policy on a child. The policy owner is the parent and the child is the insured.
Beneficiary: this is the person who is named as the payee (the person receiving money) of the insurance policy.
Premium: this is the amount of money the policy owner pays each month or year to keep the policy in effect. The money is paid to the insurance company.
Face Value: this is the amount the insurance company promises to pay if a certain event happens (death, disability, etc.).
Cash Value: Some insurance policies also have a cash value which builds over time. This usually happens with “whole life” or “permanent life” insurance policies.
Since life insurance is at the top of the list of important policies to account for in a divorce, you may need some more information about that type of policy.
