Protecting your Maintenance Payments following a divorce
Divorce Day has become a term used to describe the first working Monday of January. It’s often considered a peak time for people initiating divorce proceedings.
This trend has been attributed to a combination of factors including:
- New Year’s resolutions - Many people see the start of a new year as an opportunity to make life changes including marital issues
- Holiday Stress - Christmas and New Years holidays can exacerbate any underlying relationship issues, especially when financial stress during the cost-of-living pressures can become even more apparent
- Family Considerations - Some couples/individuals may prefer to delay filing for divorce until after the holidays to avoid extra upset, particularly for their children
- Practical Considerations - With the holidays over, people are more likely to turn their attention to legal and personal matters they had postponed.
Recent data* has shown divorce rates have stabilised somewhat in recent years, but it also indicates that may well be down to financial pressures rather than choice.
Financial settlements in divorce tend to focus on property, pensions and savings, protection policies are often far down the list of priorities, if they get considered at all. 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.
The first is the flexibility of existing family protection policies. Many are set up 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 occur.
Secondly, 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.
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 mirror the monthly maintenance commitment. If there is more than one child, some insurance companies can allow for multiple covers to 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 may provide that much needed 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.
*Data from CP Law Associates 2023
