Going through a divorce is difficult on a person’s emotional well-being, but it can be equally taxing on their financial situation as well. Not only do they have to deal with the demands of a former spouse, the lawyers, and a judge, but divorcees are often taken aback by having to throw an insurance agent into the mix as well.
When settling a divorce, the primary “breadwinner” of the dissolving marriage is often court-ordered to purchase life insurance. Attorneys often argue that the death of the primary income earner would be financially devastating for their ex-spouse because they would lose child support, alimony, college tuition, and/or property settlement payments. Because of this, courts will often require the breadwinner to secure a life insurance policy to bridge the gap of time until the youngest child turns 18.
This article will help answer questions we commonly receive from potential clients. We’ve also included our insider tips to help you find the most affordable and easy-to-obtain life insurance option available.
Quick Article Guide:
1. Can I Buy Life Insurance for My Former Spouse?
2. What Type of Insurance Policy is Commonly Purchased for a Divorce Decree?
3. How Much is This Life Insurance Going to Cost?
4. How Long Does the Life Insurance Approval Process Take?
5. How Do I Purchase an Insurance Policy Without an Exam?
6. I Need Proof of Life Insurance Now. What’s the Fastest Option Available?
7. Why Bother with Life Insurance – Is the Judge Really Going to Throw Me in Jail?
8. Should I Buy Just One Policy for the Total Amount of Time Required?
9. What if I Don’t Know How Much Coverage I Need?
10. I’m Overwhelmed, Where Should I Begin?
The short answer to this question is often “no” because it is not possible for someone to buy life insurance on an adult without their consent. Term Life Advice can help with the initial policy shopping and preparing of the application, but in order to process the request, your ex needs to be “on board” and be involved in the process. This means that at the very minimum your former spouse will be required to sign the application and policy when approved, even if you’ll be paying for the insurance. In addition, most applicants will need to complete a free, in-home/office medical exam if required by the insurer.
Term life insurance is the most common form of life insurance that is purchased to settle a divorce decree. This is because a term policy provides the largest amount of protection for the lowest cost. In addition, some life insurance companies will allow you to decrease the amount of coverage you carry as your financial obligations are met. You can keep your policy in place for only the years required by your divorce decree and once your obligations are met, you’ll be able to cancel the coverage with no penalties.
If you’re in really good health and in your early 40’s, a $500,000 term policy for 10 years could be less than $20 a month. To get the best and most accurate rates, we recommend completing a free in-home/office medical exam. If you don’t have time to complete an exam, or hate the thought of needles, don’t worry, many of the life insurance companies we represent will still offer you competitive rates without completing an exam. If you are in less than perfect health, are older, and/or have current or past health issues, your rates will be a bit higher.
Most of us are not in excellent health and that is why professional help from an independent no-cost broker is so valuable. Term Life Advice agents are licensed to shop all of the highly rated life insurance companies on your behalf. This free service saves you the hassle of applying with multiple life insurance companies to make sure you get the best rates available.
After you sign your application and complete your free medical exam, getting approved for a life insurance policy usually takes four to eight weeks. During this time the insurance company will review your prescription history, driving records, and MIB (Medical Information Bureau) records. If you have any health issues, the carrier will request a copy of your medical records from your doctor’s office. Obtaining and reviewing these documents can take a few weeks, especially if you have more than one doctor.
If you’re in a rush, give us a call toll-free at (855) 902-6494. Within a few minutes we can complete our pre-qualification phone interview, shop dozens of carriers on your behalf, and email you pre-qualified quotes from ten or more A-rated insurers within 15 minutes. Once you’ve reviewed the quotes, we’ll email you an application to sign and schedule your free in-home/office medical exam. Most of our clients are able to have their exam scheduled and completed within a week of signing their application.
If you’re short on time and need $500,000 of coverage or less, a “no exam” life insurance policy may be a better option. These policies are electronically approved within a week, but they may be a bit more expensive depending on your age and overall health.
Term life insurance policies for up to $500,000 of coverage are usually available without a medical exam. If your divorce decree requires more than this amount of coverage, you may need to complete a medical exam or purchase more than one policy. If you’re curious to see what you qualify for, give us a call and one of our agents will be able to check what is available for your age and health profile based on the state you reside in. It’s important to note that after the age of 65, very few life insurance companies offer more than $100,000 of insurance without an exam. Most no-exam term life policies are approved, active, and emailed to you within five to seven business days.
Remember, convenience and speed may come at a higher cost, especially if you have had a few health issues. After the age of 50, exam-free policies (often referred to as “non-meds”) typically run around 20%-30% more than the cost of a standard term policy. The increase in premium is due to the fact that the insurance company is assuming more of a risk by not being able to thoroughly evaluate your health. If the insurance company believes there is an elevated risk of paying a death claim, they will charge a higher cost for the policy.
Some of our clients initially purchase a quick and easy non-med policy to satisfy the courts, and once their life settles down, we help them re-apply for a lower cost term policy with an exam. Once you are approved, we’ll help coordinate replacing the higher cost policy.
Be careful when shopping for no-exam life insurance; many people mistakenly purchase accidental death/dismemberment policies. These “AD&D” policies do not cover a death due to a medical reason, and they won’t fulfill a judge’s life insurance decree.
If you’re in average or better health for your age, many term life insurance companies offer a form of temporary life insurance for those who’ve completed their application and the required free in-home/office exam. This temporary coverage is often referred to as “binding your policy.”
Binding a life insurance policy allows the applicant to receive temporary and conditional coverage from the day of their exam until the day their life insurance policy is approved. Most courts/judges will accept this temporary life insurance because they see you have started the process of purchasing an insurance policy. If you’re in a crunch, advise your agent that you wish to “bind” your coverage when completing your application. When you complete your free mini-medical exam, your exam nurse will bring a Temporary Insurance Agreement (TIA) form for you to sign.
The amount of temporary coverage you can secure varies by each insurance carrier. Most life insurance companies will allow you to bind applications for up to $1 million of coverage while some companies will actually charge you one or two months of premium to cover the standard four to eight week underwriting process. However, most life insurance companies will take your credit card information and agree to charge you a premium only if you die while in underwriting. In other words, with some companies you can receive up to $1 million of life insurance coverage for up to two months free while you wait for approval. It’s not a problem if you decide not to accept coverage because the insurance company you applied with will not charge you. In rare cases, this temporary insurance coverage has been paid to the beneficiary if the applicant passed away while their policy was in underwriting. If you agree to bind your policy and accept the temporary coverage, the insurance company is required to pay the death claim if your policy is approved at the rate you initially applied for.
This is another reason why it is beneficial to purchase life insurance from an experienced agency like Term Life Advice. Our licensed agents are very accurate in their pre-qualification underwriting. If you provide us complete information about your health, our agents will match you with the best company available for your risk profile.
If you decide not to purchase the life insurance, the judge probably won’t throw you in jail; however, you probably be faced with even more legal issues than the ones you’re already contending with. In some cases, we have seen the courts issue waivers for clients who’ve applied for coverage and been subsequently turned down due to a serious medical condition or other lifestyle issue. If you decide to apply for coverage with us and find out you’re uninsurable, your agent will send you a letter from the insurance company to present to the judge.
Some of the clients we work with decide to utilize life insurance from their employer instead of purchasing their own policy. Employer-provided life insurance may be your best option if your application for insurance gets declined. If you’re in good health but don’t want to go through the process of purchasing a policy, your employer-provided life insurance may suffice the court’s requirements. It’s important to note that if you change jobs or retire, you’ll likely lose your coverage from work. Getting a new policy when you are older will cost you more money than if you were to lock in a low rate now when you’re younger and healthier. In addition, your next employer might not offer life insurance.
Remember, each insurance company has unique “underwriting guidelines.” For instance, Farmer’s Insurance doesn’t take on new male clients over age 50, whereas Term Life Advice represents dozens of companies that do and these carriers will even accept male clients with diabetes, heart bypass history, apnea, or other significant health conditions.
For most of our clients, purchasing one policy for the entire length of the court order is the simplest option available. When you speak with your agent, make sure you let them know that you are purchasing life insurance for a divorce decree. If your agent knows that you are purchasing a policy for this reason, they will be sure to match you up with a company that allows you to decrease your coverage if needed. As your financial obligation to your ex-spouse diminishes each year, you’ll be able to decrease the amount of life insurance coverage you carry each year to save money.
If you don’t want to speak with your agent each year, layering your coverage is another alternative that could save you hundreds or thousands of dollars.
Here’s how it works:
Let’s say you have three children, ages 5, 10, and 12 and the court requires you to carry $750,000 in life insurance, meaning $250,000 per child, until each child turns 18. Term life insurance is generally sold for 10, 15 and 20 year terms. The word “term” refers to the number of years that the price of your life insurance policy is guaranteed. In other words, the longer the term of your policy, the higher the cost.
Instead of buying one $750,000, 15-year term policy, you may want to purchase two policies with varying terms. Purchasing a $500,000, 10-year term policy will provide coverage for the two oldest children until the age of 18 and purchasing a separate $250,000, 15-year term policy will protect your youngest. After eight years, your 10 and 12 year old will be 18 and you can cancel the $500,000 policy which will save you two full years of premiums. After 13 years, you can also cancel the $250,000 policy because your 5 year old will be 18. Both of these applications can be completed at the same time and would only require one medical exam.
Depending on your needs, your agent will be able to help you determine which option is best, providing you with a solution for high quality life insurance at the lowest possible cost.
If you’re in the midst of a divorce and know you or your spouse will require life insurance, we recommend you apply for the greatest amount you may need or want to consider. An application usually takes four to eight weeks for approval and once approved, you then have thirty days to make adjustments to your policy.
Once approved, you can:
• Reduce the death benefit (or keep the same amount you originally applied for)
• Change the term length by shortening or lengthening the guaranteed period
• Stagger your policies by having your life insurance issued in two differing term lengths and/or death benefits
It’s fairly common for our recently divorced clients to apply for enough life insurance to satisfy their current and future needs. As the balance of your divorce decree is settled, you have the ability to change the beneficiaries on your policies, or you can set up a collateral assignment, transitioning coverage from your former spouse to a new spouse or family if you remarry.
Purchasing life insurance can be a nerve-wracking experience, but it doesn’t have to be. By representing more than 60 life insurance companies, Term Life Advice has simplified the process of shopping for coverage. In just a few minutes we’ll compare rates from dozens of life insurance companies to make sure you get the best price available for your health, age, and lifestyle, saving you valuable time and money.
Give us a call today, toll-free at: 855-902-6494, or request an instant quote below.