“What type of life insurance do you need to protect your alimony or child support obligations?”
If you are wondering what type of insurance you should buy to protect your alimony or child support obligations, most experts suggest you buy term life insurance instead of a permanent life insurance policy that accumulates cash value.
Term life insurance premiums are less expensive than permanent life insurance premiums; that is an important consideration, particularly when you are going through an expensive life change such as a divorce. You have a few variations of term life insurance from which to choose:
Level Term– Neither the price nor the death benefit will change during the policy period. (Renewal premiums beyond the guarantee period, however, can jump ten-fold, making the selection of the guaranteed period rather important.);
Annual Renewable Term– There will generally be a guaranteed premium structure, but the premium will be scheduled to increase each year. This will be less expensive than a level term policy in the initial years when most divorced clients are hard pressed financially, so this may be an option to encourage greater coverage. However, in later years the increased cost may encourage default.
Return of Premium Term– This is term life insurance for a period of time where one receives a guaranteed return of premiums paid if you keep the policy for the term period. For example, 20- year return of premium term would guarantee a return of premium paid after you paid 20 years of premium. Most of these policies also give a partial return of premium if you keep the policy for a great part of the years.
First Cardinal Financial Services founder, Joe Faulk, currently holds Series 6 and Series 65 securities licenses and is currently licensed with over 17 health and life insurance carriers in Florida. He has been licensed to sell health and life insurance in Florida since May, 2002 and specializes in divorced decreed insurance.