Indiana couples who are going through a divorce have a lot on their plates, from hashing out child custody agreements to adjusting to life as a single person. However, one area that is commonly overlooked is their life insurance policy. Understanding how to handle this policy can help to protect the financial future of your children and those you care about.
Institute a beneficiary change
All life insurance policies allow you to list a primary beneficiary. This is the person who is awarded the amount of money specified in your policy in the event of your death. Traditionally, married couples will list their spouse as their primary beneficiary. After you undergo a divorce, it’s highly likely that you’ll want to remove your former spouse’s name and list a new beneficiary. In many cases, people will list their child as their primary beneficiary.
The cash value is part of your net worth
If you have a whole life or universal life insurance policy, it accumulates a cash value over time. Every month that you make your premium payment, a portion of the payment will be put into a fund. This fund grows with interest over time. You’re given the option by the policy administrator to cash out of your life insurance policy at any point in time. To do this, you’ll simply forgo the death benefit and take the cash value that has accrued. That cash value must be divided up during your divorce proceedings since it’s considered part of your net worth.