The importance of life insurance in a divorce

On Behalf of | Mar 13, 2020 | Divorce

Florida couples who are seeing their marriages come to an end often prefer to negotiate a settlement rather than going to court and having a judge decide on the applicable legal issues. These issues can involve alimony and child support, but many people fail to realize how important having a life insurance policy on the party who will be making these payments can be.

When the parties are negotiating alimony, they will eventually come to an agreement on how much the monthly payments should be and for how long it will last. When those details are known, they can determine what the present value of the total amount will be. As an example, if the monthly payment will be $500 and the duration will be 20 years, then the present value of $120,000 should be the face amount of the life insurance policy that is procured on the life of the payer. Of course, the payer might want to be able to reduce the face amount as payments are made and the total is reduced.

Child support will require a similar analysis, but it will depend on whether payments end when the child reaches the age of 18 or are extended through college. If the latter is the case, then the policy should take into account tuition and fees, room and board, transportation, clothing and incidentals.

The end of a marriage can involve a wide variety of emotions, and in many cases, people want to see the process end as quickly as possible. This can be a mistake if they fail to focus on important details. Individuals may find it advisable to have their respective family law attorneys review the proposed settlement agreement before it is signed.