“I think people need to remember that a million dollars is often not enough [to support a family],” Ziegler says.
In the event of a policy lapse, she says, the beneficiary will get even less upon the death of an ex, or even nothing at all if a new policy is taken out upon the lapse of the old one but has not been in effect the required number of years—usually two—before the policyholder’s death.
If a couple does not take out alimony insurance before their wedding or during the marriage, Ziegler says, it’s difficult to broach the subject right before a divorce.
“A lot of people don’t want to be the payor of the policy when they’re also paying alimony,” she says.
What should a spouse seeking alimony insurance (as well as alimony) do if the divorce is not amicable?
Ziegler says that in most states, the spouse paying the alimony to the less-moneyed spouse must underwrite the support obligation with insurance. In the event that the payor will not agree to the requirement, Ziegler says the less-moneyed spouse must seek court intervention.
What if the spouse paying the alimony insurance premiums is also the owner of the policy? And if so, how would the spouse receiving alimony know whether the insured spouse has kept the policy current and has not deliberately allowed it to lapse? On the other hand, what if the spouse who is the beneficiary of the policy is its owner?
Ziegler says either spouse can be the alimony insurance policy owner. “But experts advise, if possible, [that] the beneficiary should also be the owner of the policy to ensure it is maintained and payments are made,” she says.
In the event that the supporting spouse is the owner of the alimony insurance policy, then the beneficiary should request that person’s authorization to contact the insurance carrier to confirm that the policy is updated and in full force and effect at all times that alimony must be paid.
A surviving spouse receiving alimony has very little recourse in the event the insured spouse dies shortly after taking out the policy if the policy has not gone into effect yet, she says.