Protecting your divorce
Most of us know a friend or family member, or maybe even yourself have sadly gone through a divorce.
Life insurance policies may well be a low priority when there is so much to sort out after a separation. However, it’s vitally important that thought is given to protecting your family, particularly if young children are involved.
Financial settlements in divorce tend to focus on property, pensions and savings, protection policies don’t get a mention. If couples are struggling to meet the costs of the divorce legal process, then it’s very likely, particularly those families with children, that they would also struggle financially if one of them were to die or be unable to work through a serious illness. This is even more important when one parent is financially reliant, wholly, or partly, on maintenance payments.
In my view, there are two areas that need to be considered.
Flexibility of existing protection policies
The first is the flexibility of existing family protection policies. Many are set up at outset in a way that each party can continue with their own cover in isolation should they separate. Ownership of the policy is key, and can make splitting policies easier in the future, should separation or divorce happen.
Protecting your payments
Once the legal process has been concluded and maintenance commitments have been agreed, it’s important to look to protect these payments. The wage earner who is paying maintenance, which is often a large commitment for many years until a child or children has finished higher education, should consider if these payments could continue if they were seriously ill or died prematurely.
Family Income Benefit (FIB)
A Family Income Benefit (FIB) policy can provide an income should premature death or critical illness occur. Rather than a lump sum, FIB pays a monthly amount until the end of the policy term and can exactly mirror the monthly maintenance commitment. If there’s more than one child, many policies offer a menu plan, where an individual policy can be set up for each child with a chosen end date to perhaps coincide with university graduation or when a young adult might be financially independent.
FIB will provide peace of mind that maintenance payments can continue if death or critical illness occurs and can offer some comfort in such a challenging life event.
