When one gets married there tends to be a keen focus on taking out life cover to protect your family in the event of unfortunate eventualities. However, when going through the emotional stages of a divorce, reviewing and updating your life policy can often be the last thing on your mind.
Lee Bromfield, CEO of FNB Life stated: “similar to the process of entering into a marriage contract, partners should factor in unfortunate circumstances like a divorce when taking out life insurance for their families, especially if there are children involved.”
Bromfield unpacks five options available to consumers after a divorce:
1. Changing beneficiaries – According to FNB if you are no longer financially dependent on each other, you should review and update your beneficiary details. This is in view of ensuring that the correct beneficiaries are paid out should anything happen to either you or your ex.
2. Financial need of dependents – “When there are children involved, an agreement should be reached by both parties in order to protect them financially should both or one of you no longer be around. The decision taken will be based on your individual circumstances as well as estate planning arrangements,” Bromfield added.
3. Banking details – Individuals who are paying their policies from a joint account should contact their insurer and update their banking details, in order to avoid the policy lapsing if premium payments are no longer honoured.
“If your policy lapses, you will no longer be guaranteed the same premium on a new policy, due to factors such as age and your current health conditions, amongst other factors. Similarly, if you were financially dependent on your partner, you can either takeover the policy payments or discuss the way forward during your divorce settlement negotiations,” Bromfield explained.
4. Sum insured – Your financial situation typically changes after a divorce, as you are probably going from two salaries to one. This means that you may need to adjust your living expenses and potentially your life cover amount to cater to any shortfall that may now be there.
5.New policy – “Individuals who did not have a policy of their own while married should now consider taking out their own policy,” explained Bromfield.
Another important note according to 1Life is the protection of child maintenance.
“Often, the parent who has custody of the children is reliant to some extent on an ex-spouse to pay maintenance. Financial care for children in South Africa ends when a child reaches the majority age of 18 or becomes self-supporting (if the child is over 18, and at university, he may still be reliant on a parent or parents for financial support),” 1Life added.
However, child maintenance payments can be protected by taking out life insurance that serves to insure the life of the maintenance payer and names the children as beneficiaries.
“This means that should the maintenance payer pass away, your children will be able to receive monies for their care. The amount of cover should be the amount that would replace what you are expecting to receive in maintenance over the years, taking inflation into account,” 1Life continued.
Divorce is typically a process that brings on many emotions and sometimes has people flustered, for this reason it is always advisable to seek trusted financial advice.
Tip: Apply for life cover through Justmoney, today.