How might divorce affect insurance cover?

All / 13.09.2018

How might divorce affect insurance cover?

More than 45,000 Australian couples divorce each year, and almost half of those divorces involve children under the age of 18. Thousands of de facto relationships will also come to an end. Regardless of the type of relationship it is a time of great emotional stress.

This stress is intensified by the need to negotiate financial settlements, and with the focus on immediate needs such as funding new living arrangements and paying day-to-day expenses, it can be difficult to think about less pressing financial issues, such as insurance. There are, however, good reasons why personal insurances should be attended to as early as possible.

Ask for support

First of all, ask for support. Stress and good decision-making rarely go hand in hand. If you have a trusted friend or family member who can help you take an objective view of your situation, ask for their help and support through the process.
Early on, take professional advice. A financial planner can guide you through many of the financial aspects of divorce, including insurance. It is crucial that you and your loved ones remain properly covered at all times.

Review beneficiaries

Check who is listed as the beneficiaries on your current life insurance policies. Don’t forget to check if you have life insurance via your superannuation fund. Change your nominated beneficiaries if necessary. One option is to direct that any death benefit be paid to your estate. It will then be dealt with under your Will. That said remember to update your Will, too.

Check your priorities

If you are of working age your most valuable asset is likely to be your ability to earn an income. Safeguarding this via income protection insurance should be a high priority.

If you have financial dependents (usually children) life insurance should also be a high priority. This pays a lump sum upon death that can be used to pay off debts and provide for future living expenses. If, post-divorce, you don’t have any dependents, you may not need this type of cover.

Total and permanent disability insurance pays a lump sum if you meet the policy definition of being totally and permanently disabled. It should be considered, whether or not you have dependents. It is often bundled with life insurance.

The other personal insurance to consider is trauma insurance. This pays a lump sum if you develop one of the medical conditions specified in the policy. It is designed to help with medical and recovery costs.

Strike a balance

While insurance premiums add to the financial stresses associated with relationship breakdown, the consequences of not being properly insured don’t bear thinking about. Your adviser can help you work out a balance between effective cover and affordability.

Knowing you have the right insurance in place to protect yourself and your dependents means there’s one less thing to worry about, so insurance should be dealt with in the early days of divorce or separation. Your adviser can guide you through.

For more information or to speak to one of our Financial Advisers – please contact TNR Wealth Management on 02 6621 8544.

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances