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Term Life and Divorce

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Term Life insurance and Divorce

Big changes require review of policies

Itís probably the most stressful situation Iíve been in regarding term life insurance over my years (dare I say decades) in the life insurance market.  I wish it was a less common occurrence and in that light, weíre going to discuss the very important impact that divorce has on your term life insurance policy.  But first, a retelling of the story that prompts us to warn term life policy owners to update your policy when divorce occurs. 

It was a typical day at the office.  Starting the morning with a coffee and the list of voice mails from the evening hours.  So far, theyíre pretty typicalÖpeople request quotes or needing to address various questions on how term life insurance works.  Thatís the gist of most days for a term life insurance agent.  Call #4Ö7:30pm.  I could tell right away that this was going to be a bad call by the initial tone of her voice.  It was harsh, angry, and atonal.  I sat up straight in my air and wrote down the name and number.  No message was left on the nature of the call or what was needed but it didnít sound good.  I called the number and braced myself which in hindsight, was the correct action. 

The person on the phone went right into her issue.  Her husband had taken out a term life insurance policy 10 years (with a total of 20 years length).  He had recently passed away which was difficult in itself (to be expected) and I expressed my condolences and asked how I could be of help.  He was one of our clients so I wanted to help in any way with the policy pay out.  Thatís where the issue was.  It turns out that the widowed spouse on the phone was from a second marriage.  As soon as I heard that statement, I cringed.  I knew what was coming next.  The now-deceased husband had never changed the beneficiary on the policy which still reflected the 1st wifeÖlong since divorced from.  The new spouse on the phone with me had a 7 month old child and was a stay at home mother.  Obviously, she asked if there was any recourse and unfortunately, there probably was not.  I could hear her sign and sink upon receiving this information.  Her financial fate was subject to the hope of an incredibly giving and understanding first spouse giving this term life payout over to her.  Although Iíve seen such magnanimous acts of giving in the past, Iíve also seen quite a few first spouses that literally laugh at the request.  Letís just say that some divorces are not amicable.

This was such a situation and it turns out (more information than I needed) that the new spouse was the secretary that caused the divorce in the first place.  The plot thickens.  I gently gave her the news of what she can and cannot do but the odds didnít look good.  You donít want your beneficiaries to be in this situation after divorce so take some simple precautions.

The first and foremost is to update your beneficiary information every time thereís a major family change such as divorce, birth, etc.  If your new spouse, donít feel strange about checking the term life insurance policies to make sure they are updated.  It directly affects you and with the whirlwind activity of a wedding and new marriage, details such as life insurance policies can be forgotten.  After all, youíre all about new beginnings and starts so life insurance or contemplating the potential loss of a beloved tends to be shunned by people but itís a matter of housekeeping so donít let superstition cloud your view of practicality and make sure you update the beneficiary following divorce.  Thereís nothing that says you canít continue to keep a divorced spouse as the beneficiary on your policy (letís say to support dependent children or in amicable breaks) but the key is to have your wishes reflected in the policy.  Changes of address may also occur as the result of a divorce not to mention new credit cards (in separate name) which may be attached for auto-payment of term life policies.  All of these details need to be reviewed after a divorce.  Please contact us as your licensed term life insurance broker to make sure you policy is in good order.






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