Divorce can be one of the most stressful and emotional situations you deal with in your life.
In 2020, there were 103,592 divorces granted in England and Wales, with the majority (98.9%) among opposite-sex couples. And, with recent rule changes making it easier for couples to separate without apportioning blame, this figure could rise in coming years.
On 6 April 2022, the Divorce, Dissolution and Separation Act came into force. This allows couples to legally end their relationship without attributing any blame, with the aim of reducing the likelihood of conflict.
As well as issues such as the division of assets and arrangements for children, divorce can also lead to issues regarding life insurance and health protection that you might need to consider. Here are three things to think about if you’re separating from your spouse or civil partner.
You can’t normally “split” an existing joint-life insurance policy
If you have a joint-life insurance policy with your spouse or civil partner, it generally can’t be divided. You can’t normally split the policy in proportion to your incomes or assets.
So, when you divorce, you may have to terminate any joint-life cover that you have – and this could then leave you underinsured going forward.
If you have children, a mortgage, or other commitments then it’s likely that you’ll need to arrange some new cover in your own name after your divorce.
Possible future separation can be a good reason to consider taking out separate single-life cover when you arrange your insurance.
If you and your partner arrange separate cover, not only can you tailor the protection more closely to your individual needs, but you can keep the policy in force if you were ever to separate in the future.
Compare this to joint-life cover which typically can’t be split and that you’d likely have to cancel later on.
Read our useful guide to joint- and single-life insurance which outlines some of the pros and cons of each approach. Bear in mind, that one downside is that single-life cover is typically more expensive than joint-life cover.
You may need to ensure that you can keep up your child maintenance payments
If you have children when you divorce, one party will normally have to commit to paying maintenance payments to the other. These payments could continue until the children reach the age of 18 or throughout their life. Maintenance for children may also cover things like school fees.
If you were ordered to pay regular maintenance to your former spouse or partner, this will often be enforceable by court action. So, you need to ensure that you can always keep up these payments – whatever happens. Remember that they are to support your children and to help them to meet their life goals.
So, if you were to be off work due to illness or injury for an extended period, you would need to think about how you could maintain these payments.
For example, income protection can replace part of your income for an extended period if you were unable to work due to ill health. The payout you receive could enable you to keep up your maintenance payments and support your children.
You should also think about how you might be able to support your children if you were to die before they became financially independent.
In the event of your death, the maintenance will cease. Although your former spouse or partner may be able to make a claim against your estate, this is likely to take a significant amount of time to finalise. In the meantime, your ex-partner and your children will have to meet all their regular commitments and maintain their lifestyle.
One way you can protect maintenance payments to ensure your children receive vital financial support is by using “family income benefit”.
Rather than paying a lump sum, family income benefit pays out a regular monthly sum on your death until the end of the policy term. So, for example, you could set up a policy that paid the court-ordered maintenance amount every month until your children were 18 or 21.
This is a cost-effective way of ensuring that your children would continue to receive your important maintenance – even if something were to happen to you.
Find out more about family income benefit in this useful guide, and how it can be a great choice for parents looking for cost-effective financial protection.
You may need to protect your new partner or family
If you are planning on remarrying or starting a new family in the future, you’ll also need to think about what protection you need.
At this time, it is possible you will need to protect:
- Your existing children or any ordered maintenance you have to pay (as above)
- Any borrowing you have – for example, you may have taken on a larger mortgage to buy your ex-spouse or partner’s share of the home you owned jointly
- Any other debts you have – it is easy to accumulate debt when going through a separation
- The life of your new partner, especially if you relay on both incomes to maintain your lifestyle
- Any stepchildren that you’re now responsible for
- Any mortgage you and your new partner take out if you decide to buy a home together.
Taking out single-life cover at this time (as you read above) can protect you from any future changes to your circumstances.
You may also need to review your income protection cover to ensure that, should you be unable to work, you will continue to receive an income to enable you to meet your ongoing commitments and to ensure any maintenance payments will continue.
Get in touch
Going through a divorce can be stressful. With so much to worry about, you may not see issues such as life insurance and other financial protection as a priority while you finalise what seem to be more important matters.
However, making sure you have the right protection in place going forward can be really important – for all the reasons you have read above. There are three key areas to consider.
If you’ve cancelled any existing cover you had you could now be seriously underinsured. You will still be financially responsible for your children until they reach adulthood, so your premature death might still damage their prospects even if you’re no longer married to their other parent.
You may also have other debts or commitments that you want to ensure are cleared on your death.
Critical Illness cover
If you were diagnosed with a serious illness, would you be able to maintain your standard of living? If not, you should consider Critical Illness protection, which will provide you with a tax-free lump sum if you’re diagnosed with certain forms of cancer, or if you have a serious heart attack or stroke.
If you’re unable to work for an extended period due to illness or injury, you might find it difficult o keep up your child maintenance payments as well as pay your regular commitments such as mortgage, rent or bills.
Income protection will ensure you continue to receive a regular income, enabling you to make your maintenance payments and support your children as they grow up.
As protection experts, we can scour the market on your behalf to find the best price for the cover you need. We work with dozens of the UK’s leading insurers and can find you the right protection at the right cost.
5 things science says can help slow the ageing process and help you to live longer
November 16, 2023
Almost half of those planning a funeral were “stressed by the cost” – here’s what you can do
November 9, 2023
Revealed: The 5 most important things you’ll consider when buying health and life insurance
November 2, 2023
Dementia – here are the symptoms to look out for and how protection can provide valuable support
October 26, 2023
2 in 3 adults worry about money – here are 3 useful ways to reduce your financial stress
October 19, 2023
5 easy steps to finding the right life insurance for you
October 12, 2023