If I’ve been through a divorce, should I reduce my life insurance death benefit?
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Asked April 15, 2013
Getting a divorce does not automatically mean that you have less to protect. In order to make the decision of whether to lower your death benefit, you should look at your current debt. Sometimes your debt will be lower after a divorce, but it may be higher as well. Since each divorce is a special case, the decision has to be arrived at for each person individually.
Another important factor will be your beneficiaries. If you have minor children, then your life insurance should be set up to provide for all of your children until they are old enough to move out on their own. If your children are already grown then you will have less need for life insurance. Similarly, if you have other dependents, such as a mother or a handicapped dependent, it will be important to provide for them in your life insurance.
Remember, it is less expensive to buy life insurance now than it will ever be again. If you decide to increase your life insurance in the future, the premiums you will have to pay will be based on your age, physical condition, and your health. Since you will never be younger than you are right now, it makes sense to purchase enough life insurance to benefit you later, even if your insurance needs increase. This is why insurance specialists advise their clients to purchase life insurance for their children - Buying the policy early will result in lower premiums for the life of the policy.
What you can drop from your life insurance policy is the spouse rider. If you have "last survivor" coverage, consider removing your spouse from the policy and converting to a standard life insurance policy. Unless you are specifically order to do so by the court, your responsibility towards your spouse ends with the divorce, including insurance policies and shared ownership of property. In some cases, you may be ordered by the court to maintain life insurance for a specific amount of time, but most people are relieved of spousal obligations when they become single again.
In general, it is not the death benefits that you will be reducing, only the obligations that tie you to your spouse. After all, you still want to pay college tuition for your children; you still want your beneficiaries to receive some assistance, etc. Only you can determine precisely how much coverage you need to have, but it is important that you purchase enough to cover all of the necessities of life for loved ones who outlive you. Maintaining an accustomed standard of living is one of the primary purposes of life insurance, and those needs will not usually change a great deal after the divorce is finalized.
Answered April 15, 2013 by Anonymous