If you’re getting divorced and you have a life insurance policy, don’t overlook it. You have a lot of financial issues to work through, from dividing assets to determining child support obligations, and it’s easy to forget about this policy. But, as you’ll see, there are some very good reasons to give it the attention it deserves.
First and foremost, if your ex is named as the beneficiary, they’re probably going to get that life insurance payout. Since the spouse is the most common beneficiary, this is an issue a lot of people run into. It’s easy to fix; you just need to update the beneficiary designation. But it can cause some problems if you forget to do it, you pass away and then the money you wanted to go to your children goes to your ex.
The next thing to think about is the cash value of the policy at the time of your divorce. If you and your spouse have been using your joint assets to make payments, some of the money — it differs from policy to policy — goes into a fund. That cash value is always there for you to request if you want it. You may both have a right to that money, so you need to consider it when dividing assets.
The most important thing to remember is that, if you have children together, that money is supposed to protect them financially. Make sure that any changes to your plan focus on giving them that protection, even as your family life changes dramatically.
Throughout this whole process, be sure you are well aware of the legal options you have and the steps you will need to take.