Life Insurance for Child Support

Written on August 13, 2016 by Kaizen Retirement Wealth

Life insurance for child support – not fun

So you are going through the Big D and now they mandate you to buy life insurance for child support as part of your divorce settlement.  If it feels like you have a noose tied around your neck, don’t fret!  Cooler heads must prevail.

Here are 7 Steps to help you deal with Court Ordered Life insurance for child support.

 

  1. Take your Marching orders seriously:  don’t mess around with the courts. Do Not put this off for another day.  Contact an independent insurance agent who can quote you several top rated companies quickly.  If they can only quote you one company, they are likely captive.  You want insurance companies to compete for your business.
  2. Communication is key: Have your agent communicate with the opposing attorney and the court.  A simple cover letter and quotes for the amount needed will be acknowledging that you are in the process of securing insurance.  A phone call works well too.  Regardless, communication is key in any conflict resolution.  
  3. Suck it up and disclose all!  Really, you need to move forward in the right direction.  If you use Tobacco, street drugs, or you are unfit, be upfront with your insurance agent.  You need to disclose everything.  This will ensure that there are no surprises in the underwriting process and that you are being matched with the best company for your unique lifestyle.  As an example, some companies rate recreational marijuana use differently.  A good life insurance agent will advocate for you and make sure that your issues are addressed and insured with the right company.  Another example, some companies will ding you for using all tobacco products, where others will favor smokeless tobacco use like dip and chewing.  
  4. Consider Non-Medical Life insurance.  Non-Medical life insurance is often issued within a few week and in some cases within 24 hours.  The application is a simple process of answering a handful of questions.  You will pay more for this type of policy, but there is benefit in having one less thing on your punch list.  Having secured court order life insurance within a few weeks will show the judge that you are serious about meeting the requirements.
  5. Make a plan to keep your insurance inforce for the required time.  This often means till the youngest child reaches adult age.  Having the right amount of life insurance and for the right amount of time will be a requirement that you will have to meet the court order.  Term life will be the cheapest way to solve for this need.  Is some cases, using a Return of Premium may be the best value.  After your court order requirement is completed and at the end of the term period, the Return of Premium gives you every dollar back.  Regardless of the cost, your plan should fit within your budget during good economic times and bad.
  6. The amount of coverage you need may delay the process.  Million dollar earners, celebrities, and sports icons often need several million in coverage which can take additional underwriting requirements and delay the process of securing insurance.  If you require a Multi Million dollar policy, It is crucial that you start the process immediately.

 

Divorce is a frustrating process yet if you keep these steps in mind, you should be able to cross purchasing life insurance for child support off of your punch list.  Life insurance for child support is similar to any life insurance process with one major exception, it needs to be expedited quickly.  Working with an agent that is not familiar with life insurance for child support or that does not understand the expediting process will likely result in more frustration.

 

Unique Aspects of the Contract

There are four unique aspects of a contract for life insurance for child support.  These aspects are owner, payor, insured, and beneficiary.  It is important to understand how they work.

  • Owner holds and controls the contract.  The parent obligated to pay for the child support is often the owner.  In some cases owner is assigned to a trust.  Ownership can be transferred.
  • Payor is the parent obligated to pay child support
  • Insured is also the parent obligated to pay child support
  • Beneficiary can be the child, ex-spouse, grandparent, or parent.  A better alternative may be to designate someone as “Custodian” under Uniform Transfers to Minors Act (UTMA) for the benefit of the child or children.

 

It is likely that the parent obligated to pay for child support will be the owner, payor, and insured.  Yet in some cases designs, the ex-spouse or trust can own the policy.  This is to prevent changes to the beneficiary.

Keep this Top of Mind

If the children are young, child support payments can continue for a course of 10, 15, 20 years.  Court ordered life insurance for child support answers the question, “What happens if the parent paying child support dies prior to the completion of the child support obligation?”  A life insurance for child support policy is the most practical way to ensure that payment s will continue despite an untimely and unlikely death.

 

You may also want to review best life insurance options for children if your children are young and under your support.  As a parent, you are best to have a solid life insurance plan in place for your family and your children.  


Have Questions?

Wonder What life Insurance Solution is Best for your court order?
Feel welcome to reach out and ask us about solutions for Life Insurance for child support. We do our best to respond to questions via email within 24 hours, and while I can’t guarantee we’ll be able to help everyone, we do our best to at least get you the answers you need so you don’t make a long-term commitment to a complicated financial product you might later regret. Simply reach out to us or leave us a comment at http://lifeinsurancetoolkit.com/contact/

 

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Happy planning,

Jose, Hoser, Joe from the show

About Kaizen Retirement Wealth
About Kaizen Retirement Wealth

We work with individuals across the nation to secure the best life insurance rates.

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