Three Insurance Policies every Divorce Lawyer should know about
July 14, 2021
Whilst we may be able to advise our clients going through divorce about the types of Financial Orders the Court can make, many of us often overlook other important financial issues that should be considered.
Insurance policies can be overlooked as part of an overall financial settlement following divorce. They are designed to protect individuals and families against unlikely events that, if they occur, could have a catastrophic financial impact.
In this short article I have teamed up with Chartered Financial Planner Stephen Harwood-Gray of BWF Consultants to find out more about three insurance policies every divorce lawyer should know about.
- Long term income protection insurance
Around 1 million workers a year find themselves unable to work due to a serious illness or injury. Many employers only offer statutory sick pay or pay sick pay for a relatively short period of time but after that time people can be forced to deplete their savings and potentially claim benefits.
An income protection policy is designed to provide up to 60% of an individual’s gross income as a benefit after a specified waiting period. This is normally set to coincide with the ending of an employer’s sick pay. The policy would continue to provide a monthly benefit until the specified end date, which is normally set to the individual’s retirement age.
Income protection protects individuals and families during a period of serious illness or injury . It allows them to keep their home and family safe while they take time to recover or adapt. Long Covid has highlighted the risks that individuals face from being unable to work.
- Maintenance payment protection insurance
If your client is the primary caregiver to their children and he/she is receiving maintenance payments from the former spouse, those payments can be protected by an insurance policy in case the paying spouse becomes unable to work and/or passes away.
This insurance can be created before the divorce completes and incorporated into the financial settlement. It is designed to pay a regular benefit to the recipient after the death of the life assured and continues to pay out until a specified date. For example, if maintenance is set to run until a child of the family turns 21 years of age, an insurance can be created to match this responsibility and ensure that the children’s financial welfare is secure should a death occur.
- Family protection insurance
The death of the primary caregiver is a catastrophic event in itself but it also leaves the family financially weak and the children might be forced from their home and left without financial support. Many parents aspire to being able to help buy a first car, help with the deposit on the first house or pay for a wedding. If the family home must be sold to pay off a mortgage the ability to provide financial support and launch children into the world is greatly diminished.
As always, our clients should take their own financial advice from a suitably qualified adviser. To ensure that we provide a more holistic service it is important to know what insurance policies exist and how they can assist in times of trouble.
Dominic Lee & Stephen Harwood-Gray