Here’s what you should do with your policies when you are getting divorced
Ordinarily, the 14th of Feb would incite thoughts of moonlit dinners, long walks on the beach (although not so much with the revised level 3 lockdown restrictions) and sweethearts exchanging lavish gifts of jewellery, roses and chocolates. However, for many couples Valentine’s day this year, like every other social event, has been cancelled. The reality is that because lockdown has forced couples to spend an unusual amount of time together, there is an increase in couples deciding to permanently “social distance” from each other. It seems that like the rest of us Cupid has gone into self-isolation and is otherwise unavailable.
While divorce is not exactly at the top of the list of discussion topics, especially at a time when people are lovesick (despite the wearing of masks and incessant sanitising), it is crucial to discuss this with regards to your insurance. Here are a few things that you need to consider if you are undergoing a divorce.
Include insurance into your divorce settlement.
Sometimes a divorce settlement can include insurance, such as health insurance. Say, for example, that you were covered by your spouse’s medical aid. When you get divorced, you may have the option to stipulate in the settlement that you and your children still receive coverage from your ex-spouse. Now, let’s presume that you are in the opposite situation. That is, you’re undergoing a divorce, and you’re the one with a medical aid that covers your ex-spouse. If this is indeed the case, you need to bear in mind that, after the divorce, your medical aid plan may charge an additional premium for your former spouse and your children.
What happens in a situation where you have taken out a joint policy?
Joint policies do exist in South Africa, which could be a viable option for many couples. However, joint policies are not always widely available, which is why individuals often opt to have separate life policies to cover each other. But what happens if you have a joint policy and you get divorced? The answer is a bit of a toughie. Essentially, you will need to decide who will continue to pay the premium and who will be removed from the joint cover. This may prove difficult for the removed spouse as they will need to restart a whole new policy, which could very well have a higher premium.
Update your beneficiaries.
This has to be one of the most critical points. It is always good practice to keep your life cover up to date to ensure that your beneficiaries are adequately protected financially. This is especially relevant in the case of a divorce. Let’s be honest, divorces more often than not get quite messy, which means you may want to remove your spouse as a beneficiary. We should clarify that just because you remove them from your will, doesn’t mean that you have removed them as a beneficiary from your life policy! You will need to contact your broker to make the necessary changes to your life policy. We have often come across the scenario where an individual changes their beneficiary from the ex-spouse to their child. This is particularly problematic if the child is a minor as Insurance Companies are not legally permitted to pay the proceeds of a policy directly to a child who is not yet 18 years old. You, therefore, may not necessarily have control over whether your children, in fact, receive the pay-out. FYI, here is an article that explains what would happen in the case where a minority is nominated as the beneficiary.
If you do find yourself in a situation where you are getting a divorce, contact a broker at PBA financial services, who will guide you through the entire process.