Life insurance is a very helpful tool in divorce cases, as well as parentage cases. Life insurance is most widely used for guaranteeing support or educational expenses will be paid for a minor child or children in the event of the untimely death of one of the parents. The way life insurance generally works is that it insures someone’s life, and the beneficiary receives a lump sum of money in the event of the insured’s death. Generally, both the obligor and the obligee for child support purposes have to take out policies. Policies can be for a benefit amount that covers support (estimated) until the child emancipates or, for child support until emancipation plus the cost of college. Life Insurance also could just be that the beneficiary payment on death benefit is only the amount that the person has through their employer. It varies from case to case.
Life insurance can also be used to secure maintenance or spousal support. Much like as set forth above, the life insurance would usually be enough to cover the duration of the maintenance, or, whatever arbitrary number the parties agree to. Sometimes it is just the amount of insurance benefit the obligor can receive from their employer.
However, life insurance may also be required when there is a pension benefit that would be due to the other spouse if the participant reaches retirement age. With certain pensions, the alternate payee won’t receive any money if the participant pre-deceases the alternate payee. In these scenarios, life insurance can also be used to “guarantee” the payment of the pension benefits to the alternate payee, though it may be at the expense of the alternate payee. Depending on the value of the pension benefit, it may be worthwhile for the payee to invest in a life insurance policy covering the participant.
There are many different reasons that life insurance may be used in divorce or parentage actions, these are just a few examples. We work with parties regarding support and retirement related issues regularly and happily discuss the benefits of life insurance policies with our clients.