Why is life insurance necessary after a divorce?

Life insurance is a detail many divorcing couples have to deal with. A judge decides the terms of child support and alimony when couples can’t settle. A California judge can order life insurance to cover any obligations of the paying parent. Life insurance allows the paying parent to cover their ex-spouse or children after death. A judge looks at many factors when forming a decision.

Life insurance covers child expenses

After a divorce, life insurance covers the other parent’s expenses and children. Circumstances around children can complicate the calculations. The amount of child support depends on the parents’ expenses until the child graduates. Child support may not be the best way to calculate life insurance. Children may have expensive after-school activities or end up going to college. As children get older, the need for life insurance decreases. Parents may add provisions to lower the policy payout at certain ages. A three-year-old requires more insurance than a 12-year-old.

Life insurance covers alimony

Life insurance can cover alimony in case the payer dies. Advisors utilize a present value instead of calculating the years of alimony to keep payments fair. A person who would get $100,000 a year for ten years could use a $1 million life insurance policy. If the payer dies two years into the payments, the ex-spouse might receive more money than they should have.

The beneficiary of the policy

The beneficiary of the insurance policy can be an awkward conversation. The surviving parent can receive the life insurance, but the paying parent may want a trustee or co-trustee instead. Parents can put their children as the beneficiaries of their life insurance, but minors have special rules. Either way, the person and their attorney should talk to the insurance company.

A judge will factor in the age and health of the paying spouse. The health of the payer may prohibit the necessary amount for life insurance. Other securities to cover support may be necessary. Judges consider all factors of the case before deciding settlements and issuing judgments.