Couples frequently overlook life insurance as they go through the divorce process, but life insurance can be a valuable asset at the time of divorce and also in the future. Delaware couples, like couples in other states, must decide what to do with policies they purchased during the marriage as well as policies they can purchase to protect their financial futures.
Life Insurance As an Asset
Some types of insurance policies, called whole life policies, carry cash value built up over time by premium payments, while others have no cash value. Whole life policies acquired during the marriage are considered assets divisible in a divorce because of the cash value they carry. Delaware allows couples to reach their own agreements about how their property should be divided, but the court will divide the couple's assets if they cannot agree. Delaware law requires the court to divide all assets equitably, but not necessarily equally, based on the court's consideration of factors like the length of the marriage and each spouse's sources of income.
Continuing Existing Policies
Delaware law allows the divorce court to order the spouses to continue the life insurance policies in place at the time of the divorce, regardless of the type of policy. As long as the policies were purchased during the marriage and owned by at least one of the spouses, the court can order the spouses to continue paying the policies and leave the beneficiary designations alone. Thus, a husband might be forced to continue paying for his life insurance policy that lists his wife as the beneficiary, even long after the divorce is final.
New Life Insurance Needs
Life insurance policies can also be an appropriate way to guarantee alimony and child support payments, so either spouse can purchase a life insurance policy covering the paying spouse. With these policies, the couple ensures that the recipient spouse will have some money to replace the alimony and child support payments that stop when the paying spouse dies. For example, if one parent pays $500 a month in child support but dies soon after the divorce, the other parent typically must take care of the child without that $500 a month. A life insurance policy could give that other parent several hundred thousand dollars to cover the child's expenses.
Get Agreements in Writing
Since life insurance issues can be complicated and typically involve large amounts of money, it is important to get agreements in writing. Delaware couples can reach their own agreements, recording those agreements for the court to adopt as part of the divorce decree. In such an agreement, a divorcing couple can decide who gets the value of the life insurance policies they already own as well as who pays the premiums on continuing and new policies and who gets to be the beneficiary of those policies. With these details in writing, the agreement is legally enforceable should one spouse later change his mind.