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New Jersey divorce: Avoiding term life insurance policy mistakes

A recent article from the Huffington Post addresses the purchase of term life insurance during the divorce process. This type of insurance is often used to provide financial security to an ex-spouse in instances where alimony or child support are part of the divorce settlement. As with many other aspects of a New Jersey divorce settlement, fulfilling the requirement to purchase tem life insurance typically occurs after the divorce is finalized.

What happens if the ex-spouse cannot purchase the policy due to poor health, or it is later found out their coverage has lapsed? For many people, this could be disastrous because a property settlement generally cannot be changed once it has been completed. Before signing the agreement, it may be a good idea to plan in advance and consider the potential outcomes should either of the above two scenarios occur.

The amount of insurance protection one needs should be calculated based upon how much financial support is required to be paid over the course of the agreement. The amount paid to the beneficiary should normally be large enough to pay off any credit card debt, any children's college debt and a current mortgage. If the spouse fails to pay the premium and coverage lapses, it might be a good idea to request one's name on the policy as someone who is notified when the premiums remain unpaid.

Another issue that could be slightly more difficult to control is when the spouse changes the beneficiary on the policy. Becoming the owner of the policy can ensure it cannot be changed. The ex-spouse would be insured and also the one responsible for paying the required premium. Ex-spouses who later find out the beneficiary has been changed could also file a lawsuit against the estate, requesting the amount of money due from the required death benefit. Working out a New Jersey settlement during a divorce can be rocky, but if everything gets hammered out to avoid most future problems, one can ensure a secure financial future.

Source: The Huffington Post, "Divorce and Term Life Insurance: Avoid These Three Common Mistakes!," Gabrielle Clemens, July 16, 2012

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