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Divorce Insurance

Guest post by: Oleksandr Bomshteyn

Article Overview: The title sounds intriguing, doesn't it? No, there is no insurance for not getting divorced. What this post is about, is how to manage the risks associated with payments of child support and Spousal Support. Often times part of the settlement will involve continuation of Spousal and Child support payments for a set period of time, even in case of death of the supporting spouse. The question becomes how will you accomplish this? There are a couple approaches:

Divorce Insurance

The title sounds intriguing, doesn't it? No, there is no insurance for not getting divorced. What this post is about, is how to manage the risks associated with payments of child support and Spousal Support. Often times part of the settlement will involve continuation of Spousal and Child support payments for a set period of time, even in case of death of the supporting spouse. The question becomes how will you accomplish this? There are a couple approaches:

1. The after death support will be drawn from the estate. This might work for you in the case that:
   1. You have enough net worth in the estate to cover the liability
   2. You don't mind the estate being sold off to pay off this liability, versus going to your new family for example. Remember this may limit the transfer of assets to ensure the child support monies are protected.
2. The second approach is to buy a life insurance policy of sufficient value and make your ex-spouse the beneficiary. The challenge here is two-fold, most lawyers will insist the beneficiary be irrevocable and may insist the policy be permanent insurance vs. a term insurance solution. Secondly once the cheque is issued there typically is no control over how the monies are spent.

So what is a much better solution? I believe the best solution is Divorce Insurance. Divorce Insurance is a Term Life Insurance solution that offers a guaranteed monthly income stream for a set period of time, instead of a lump sum payment, so basically the payments would continue as if nothing changed.

Let's look at an example to see how it might work:

John Smith is 40 Years of age at the time of his divorce. He has one child age, 3 years. His divorce settlement calls for support to continue until his child turns 21, the support payment is $1000 dollars per month. If John buys Divorce Insurance he would be paying a flat rate premium of $27.45 per month until he turns 60 at which point his child is 23 years old. Should John die, the proceeds of this policy would pay the $1000/month for the care of his child.

This solution provides a clear path in case of John's death and costs John less than 3% over and above his child support payments.

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Article Tags: child support payments, Divorce Insurance, insurance, Life Insurance



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