Last week, Jennifer Millner authorized a post entitled “Don’t Forget to Check your Life Insurance!” on this blog. Two weeks ago, I posted a blog about the seminar that I recently participated in regarding the top “financial mistakes”, focusing on possible overlooked considerations regarding the marital home. At that seminar, I raised some additional points regarding life insurance that merit consideration. Here are a few:
- if it is a limited duration alimony case, consider reducing the amount of the obligation during each year of the term. Even if it is a permanent alimony case, give consideration to reducing the total life insurance at some point (though this is harder to get agreement on then in a LDA case).
- To calculate the amount of necessary life insurance, don’t forget to present value and tax affect the obligation. If you simply multiply the amount of alimony by the term, you will likely be over securing the obligation.
- Make sure that you are insurable before agreeing to obtain life insurance. If you are agreeing to get more life insurance than you have, make sure you can get it before you agree.
- Similarly, if term insurance is presently in effect, find out when the term ends. If the term of life insurance expires before the term of alimony and/or before emancipation of all children, discussion should be had as to whether obtain additional insurance at the time of the settlement before it becomes cost prohibitive or unavailable.
- If someone has an existing medical condition and they are being asked to get life insurance, if available at a reasonable cost, define what “reasonable cost” means.
- If someone is going to be relying solely or heavily on life insurance provided through employment, consideration should be given to what will happen if that job is lost, as is the insurance coverage. In fact, you may want to consider getting private life insurance if available and cost effective.
The above considerations are not inclusive, but are things that should be given consideration before an agreement is reached. Moreover, while not all of these things are applicable in all cases, they are certainly things that should be considered, as appropriate.
Eric Solotoff is the editor of the New Jersey Family Legal Blog and the Co-Chair of the Family Law Practice Group of Fox Rothschild LLP. Certified by the Supreme Court of New Jersey as a Matrimonial Lawyer and a Fellow of the American Academy of Matrimonial Attorneys, Eric practices in Fox Rothschild’s Roseland, New Jersey office though he practices throughout New Jersey. You can reach Eric at (973)994-7501, or firstname.lastname@example.org.