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 says, 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.
He unpacks five options available to consumers after a divorce:
- Changing beneficiaries – if you are no longer financially dependent on each other, you should review and update your beneficiary details. This is to ensure that the correct beneficiaries are paid out should anything happen to one of you.
- Banking details – individuals who are paying their policies from a joint account should contact their insurer and update their banking details, 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.
- Financial need of children – 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.
- Sum insured – your financial situation may change after a divorce, making it necessary to adjust your life cover amount to cover any shortfall.
- New policy – individuals who did not have a policy of their own while married should now consider taking out their own policy.
“Failure to review and update your life policy after a divorce, may not only lead to family disputes and costly legal battles, but those who are dependent on you in financial distress,” concludes Bromfield.