Life Insurance Post Divorce Family Law Toronto

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Chris Coulter

Life Insurance Post-Divorce: What Do I Need To Consider?

No one likes to think about purchasing life insurance, but you don’t want to be in a position where it’s too late to even consider it.

This is probably not top of mind if you’re newly separated, but there are some very good reasons why you should consider having insurance after a divorce, especially if you have children.

 

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Different Types Of Insurance To Consider

1. Life Insurance

Not many are enthusiastic about buying a policy for one’s eventual death, but if you have children or someone who is dependent upon you, take this option into consideration.

The intent of life insurance is to replace your income in the event of your absence. Also, the purpose of insurance is to pay off any debt that you may have. This could include a mortgage, line of credit, credit cards, car loans, or student loans.

There are also permanent insurance needs like funeral expenses and final legal and accounting fees upon your death. These items will always be required, and the longer you wait, the greater your life insurance costs will increase with every year.

2. Critical Illness Insurance

This may be the most important insurance you invest in. Critical illness covers the most common and severe illnesses that you can be stricken with, but the most common issues are cancer, heart attack and stroke. This form of insurance pays out a lump sum amount, 30 days following diagnosis. This will allow you to focus on getting better without having to worry about how your bills will get paid. Typically, critical illness insurance should replace your income for a period of six months to two years, although some insure themselves to have mortgage and other loans to be paid off. You also have the option to have a return of premium rider included, which allows you to get all your money back should you never need to make a claim. Some look at this as forced savings.

3. Disability Insurance

This is also known as Income Replacement insurance. This form of insurance is often offered as part of an employee benefit package through many employers. Should you be off work for injury, sickness or any other health related issue that prevents you from going to work, disability insurance offers a replacement of your income. Plans are usually activated after 120 days of being off work, but are available sooner if requested. It is possible to receive a critical illness payout and disability insurance for the same life event.

How Much Insurance Do You Require?

Your insurance adviser should go through a detailed Financial Needs Analysis to determine the amount you should be insured for. This will identify any mortgage, debts or future living requirements for your heirs up to a certain period of time when they are financially viable to support themselves. Depending upon the age of your dependents, you might be surprised as to how great your insurance requirements are. Nevertheless, at the end of the day, you make the ultimate determination as to how much insurance you purchase, and it’s often based on how much you can afford.

Your insurance adviser should meet with you annually to see if your requirements have changed, and if your insurance needs have increased or lessened.

I Have Life Insurance Through My Work

Many have life insurance through their place of work, but often don’t realize how inadequate that amount will be. It is imperative that a Financial Needs Analysis be done to determine your insurance requirements. Your life insurance that you receive through work will get factored into this number.

Your need for life insurance after you divorce is vitally important for both you, your ex-spouse and any children you may have. It would be recommended that life and other insurance should be considered as an ongoing commitment to safeguard against any catastrophic events occurring in the future that could disrupt the financial livelihood of the family.

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