It’s
probably the most stressful situation
I’ve 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, we’re 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, they’re pretty
typical…people request quotes or needing
to address various questions on how term
life insurance works. That’s the gist
of most days for a term life insurance
agent. Call #4…7:30pm. 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 didn’t
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. That’s 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 wife…long
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 I’ve seen such
magnanimous acts of giving in the past,
I’ve also seen quite a few first spouses
that literally laugh at the request.
Let’s 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 didn’t look good. You
don’t 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
there’s a major family change such as
divorce, birth, etc. If your new
spouse, don’t 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,
you’re all about new beginnings and
starts so life insurance or
contemplating the potential loss of a
beloved tends to be shunned by people
but it’s a matter of housekeeping so
don’t let superstition cloud your view
of practicality and make sure you update
the beneficiary following divorce.
There’s nothing that says you can’t
continue to keep a divorced spouse as
the beneficiary on your policy (let’s
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.
|