The Necessity of Insurance Plans Following Divorce - Greyfont

The Necessity of Insurance Plans Following Divorce

When your marriage is over, it's time to chart out a new life. Rock solid finances are needed for that. It is common in India for women to give up their career and become the primary caregiver of the household. Thus a decision like divorce affects the women  in India.. This is supported by findings of the National Marriage Project at Rutgers University wherein it was found that divorce reduces a man's standard of living by 10 percent and a woman's by almost three times that much.

In cases of most mutual divorces, the financial aspects are handled with pragmatism wherein details of settlement are agreed upon by both parties and they themselves handle the mode of settlement. The settlement may or may not involve any asset/money. This agreement is then reaffirmed in the court and one is now good to go his own way.

But more than often not, one spouse becomes the dependant on the other, especially when children are involved and thereby one needs the equal division of car, house, retirement policies as also insurance policies. Couples caught in the bliss of marriage are prone to hold joint assets or have made investments in which case one needs to make sure the following modifications are made in the Insurance Policies:


1. Change in Nomination


Changing your nominee in your insurance policy from your spouse to a next of kin is the first step to do after  considering a divorce. The more prompt this decision is, the better it is for each of the parties involved. A letter is submitted to the insurer detailing the action of changing the 'Nominee' to make sure the new nominee has 'insurable benefits'. If the death of the policyholder results in direct financial losses to the nominee- that condition is known to have insurable benefits for the nominee.

The new nominee in your insurance policy can be a close blood relation but are most commonly children. In such cases sometimes the spouse is trusted with the responsibility to pass on the proceeds of the policy to the correct beneficiaries. The nominee is also expected to pass on the proceeds to the correct beneficiaries according to the will of the law.


2. Having the Correct Assignee


An assignee is needed if the nominee is a minor. The assignee acts as the caretaker of the policy in case the plan matures or the policyholder passes away. Complications arise if one spouse has appointed the other as the 'assignee' as because assignment involves the transfer of both rights and liabilities of the insurance plan to the assignee. This sole right of the plan might prove harmful if the spouse decides to put obstacles in the process of changing nominees or reassignment.  This is because any change in plan will need the approval of the current assignee.


3. Joint Insurance Policies


Joint insurance policies can be really tricky as most insurers do not split such plans. Only exception would be if there was a 'separation benefit' involved. One can either cancel the entire insurance plan or decide for one spouse to take over the insurance policy. Comparing the cost of taking over the policy as opposed to starting a new plan makes it easier to decide. The one who takes over and pays the premium gets to decide who the beneficiary is. One might also choose to put the policy in a trust if children are involved.
Insurance policies such as ULIPs and endowment plans are settled as per the contribution made by each partner.

It is imperative to not let emotions take the better of you in matter of finances post a painful separation. Taking help of a financial advisor is a smart way to deal with it especially in cases of acrimonious splits where spouse are known to hide assets from the other.



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