Going through a divorce can be an emotional, mental, and financial roller coaster. Divorce decrees often include child support or alimony payments. Often a judgement or a settlement will be made which requires the spouse paying child support or alimony to buy a life insurance policy as part of the divorce agreement. The policy insures that if you die, there will be money left to fulfill the spousal support or child support obligation. If you need to get a life insurance policy as part of a divorce decree here are some tips that can help save you money.
If you need to get a life insurance policy, chances are you can save money by reducing the coverage over time. For example if the court requires that you have $250,000 of coverage per child, until each child is 18 and you have two kids, you will need to buy a $500,000 life insurance policy. However if one child is 16 and one is 10, after two years of owning the policy you can reduce the coverage to $250,000 since your obligation now is only for one child. Make sure that the life insurance company you choose allows you to decrease the coverage and in turn lower your premium.
The same would be true if the reason for the life insurance policy is for alimony or child support payments. As you pay off your obligation over the time, the amount of life insurance required should be reduced. By applying with a life insurance company that allows you to lower your coverage you can reduce your premiums and save money.
If you’re obligated to buy life insurance as part of a divorce agreement or decree then I suggest buying a term life policy. A term policy will be your cheapest option for the most amount of coverage. If you need to have a policy in place to cover alimony payments that are due for the next 10 years, make sure to get a 10 year level term policy. The shorter the term period, the more cost effective the policy will be, so only get what is required.
If you only need coverage for a few years, consider a short term life insurance option. For example you can buy an Annual Renewable Term policy. This coverage option is the cheapest form of term life insurance. Since the price of the policy increases each year, this isn't a good long term option that most people will buy. However if you only need to have a policy in place for five years or less, this will likely be your best option. You can see the future rate increases when you get the quote and you can compare the total cost of an annual renewable policy (also called yearly renewable) to a 10 year term policy.
As an example, let’s say you need to have a $250,000 policy in place for the next three years. For a 40 year old male in average health, A 10 year term policy would be $322 Annually - which would be $966 over three years. A Yearly Renewable Term policy would be $182 in year one, $210 in year two, and $235 in year three, for a total cost of $627 over three years, for a total savings of $339.
When shopping for term life insurance you want to get the best possible price. Comparing quotes among A.M Best A or A+ rated companies is the way to find the best price on a term life policy. You can use our quote tool below this blog post to get term life insurance quotes.
If you have a specific health condition such as diabetes, MS, Crohn’s, Hepatitis C, or other pre-existing conditions, I suggest working with an impaired risk or high risk life insurance specialist. At ChooseTerm.com we specialize in high risk life insurance. Fill out our Contact form and we can discuss the best strategy to get the most competitive term life insurance rates, or help you get approved with a pre-existing medical condition.