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Insurance coverage after divorce part 2: Life insurance

In our last post, we began a discussion about maintaining health insurance coverage after divorce. Many people don't realize that you can directly address medical coverage and cost issues in a separation agreement or other divorce settlement document. Doing so is a wise idea to ensure that you maintain coverage for yourself and your children.

In today's post, we'll discuss life insurance after divorce. Although it is not as immediately important as health insurance coverage, it can play an important role in spousal support (alimony).

Spousal support is not a foregone conclusion in divorce and is certainly less common than in the past. However, judges in North Carolina have the discretion to award spousal support when it is warranted. In cases where there is a significant income disparity between spouses and/or the lower-earning spouse has a disability that makes it difficult to earn an income, lifetime spousal support may be appropriate.

This is where a life insurance can play a role. Typically, spousal support ends when the payor passes away. However, the couple can work out an agreement whereby the spouse receiving support takes out a life insurance policy on the payor. If the payor is the first to pass away, the recipient can continue to receive payments through the policy.

The payor could take out his or her own policy and maintain responsibility for making regular payments. However, if life insurance is mandated as part of a divorce settlement, it may be a good idea to have the recipient spouse own/control the policy. The monthly payments of spousal support could be adjusted to include premiums on the life insurance policy, which the recipient would be in charge of paying.

As you can see from our previous two posts, there are many financial issues to consider in divorce and custody cases, and addressing these issues on your own can feel overwhelming. That's why it is wise to work with an experienced family law attorney to ensure that all financial issues are addressed and that no mistakes are made.

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