Navigating life after a divorce often means restructuring your financial foundation. If you rely on spousal or child support to maintain your family’s standard of living, you need to plan for the unexpected.

If something happened to your ex-spouse, would your child or spousal support payments continue? While your spouse may have an estate plan in place that names your children as beneficiaries, trying to claim against an ex-spouse’s estate for child support payments can be a complicated process. Ultimately, the size of the estate will be a determinant in recovery, and the estate will also most likely need to go through probate to settle debts.

Insurance can provide a much easier solution. Beyond just life insurance to protect support payments, disability insurance can protect payments in the event that your spouse is unable to continue to work, or their income level declines.

Term Life Insurance: Effective and Affordable

Term life is a type of insurance that does not accrue a cash value, and is only in effect for a given period of time. Because of these limitations, it is generally a more affordable type of insurance. It works incredibly well to protect a custodial parent’s child support payments, as those payments also have a term limit—they stop when the child reaches a given maturity milestone.

Determining the amount of insurance you need is also fairly straightforward. You calculate the total amount of annual payments made by the ex-spouse—including support payments as well as any other payments the ex-spouse has agreed to. For our clients with children in elementary or middle school, these could be education expenses, extracurriculars, medical, dental, orthodontia, or mental health care.

The total amount of these payments is called an “insurable interest,” and proving them allows the insurance company to determine that you have a financial interest in your ex-spouse, so they can write a policy covering that interest. To get the total payout, you multiply the number of payments by the total number of years they will be paid, for each child. The combined amount is the amount of the policy.

Taking Control of the Policy

Divorce agreements commonly specify that ex-spouses must carry life insurance, but in practice, there is no way to enforce this. It is all too common for an ex-spouse to either let a policy drop, or to change the beneficiary to a new wife or other children.

For this reason, you may elect to become the “payor” listed on the policy. In other words, you take out the policy and pay for it. If you decide to do this, to protect yourself you should also be listed as the owner of the policy. If you aren’t the owner, and are only a beneficiary, you can be written out if the owner of the policy changes the beneficiary—even if you are the one paying for it. If you must be a beneficiary, ensuring that you are listed as an irrevocable beneficiary can protect you by making it impossible to change the beneficiary without your consent.

Protecting Against a Loss of High Income

Depending on your ex-spouse’s source of income, there are several options to consider if their work situation changes. Salaried employees will likely have a workplace policy that will kick in, so there will not be a disruption in payments. However, longer-term disability, or a disability that impairs the ex-spouse’s ability to work at the same level of income-producing job, may result in a modification to the support order.

How do you prevent this? Disability income insurance policies don’t only payout if someone is permanently disabled. For specialized professionals like physicians or executives, a policy with a “true own occupation” definition of disability will pay benefits if the individual can no longer perform their chosen occupation’s material and substantial duties. For example, physical or mental health issues, even substance abuse issues that disrupt work could be covered by a disability policy. This would potentially replace part of their income and allow them to continue making the agreed-upon payments to their ex-spouse.

Relying on an employer-sponsored group policy is risky, as it may not be portable in the event of a job change. Instead, earmarking a portion of an alimony payment for a disability income insurance policy, and specifying in the court order that it cannot be discontinued or changed can provide more consistent protection.

The Bottom Line

Protecting child support or alimony payments with appropriate insurance should be part of your plan. It can be relatively affordable to get the level of coverage you need, even if you need to pay for it yourself.