Divorce can call attention to the terms of a life insurance plan

Aug 03, 2011

Divorce can be a rough experience, but it's important to make sure appropriate changes to insurance are made.

Life insurance is practical and concrete enough that policyholders can find themselves purchasing coverage and setting it aside after not much more thought than dotting the i's and crossing the t's. For this reason, things like divorce can invalidate the terms of a plan without either party knowing it. It's important that spouses review their account in the event of a separation.

Approaches to whole life and term life may vary depending on the state, particularly in how funds are distributed, and it's critical that couples know by which system they are governed. While some states defend equitable distribution, "where the value of cash from a whole life insurance policy would be equally divided" according to ARA news agency, others are "community property states," which hold more complex allocations.

Kids are probably the most significant variable to the fate of assets during a divorce. A plan may or may not need to be altered to ensure it remains adequate while changes occur to child support.

Beneficiaries, despite common responses to separation, may not take a hit. Depending on if one remarries, an ex-partner can remain an inheritor so that the location of assets after a death are consistent with plans for child custody, according to Fox Business.

Issues that arise and affect family finances are obviously complicated, though, which is why getting multiple life insurance quotes is important.

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