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Paying child support through a life insurance policy

The U.S. Census Bureau reports that as recently as 2011, 23.4 million American children lived in homes where only one of their biological parents was present. Many of these households in Charlotte rely on child support from one parent in order to meet their everyday expenses. A loss of that support due to the death of the supporting parent can often leave a custodial parent in a dire financial situation.

Most people in general don’t place having an adequate life insurance as a priority in their lives. In fact, LIMRA estimates that fewer than 50 percent of middle income earners under the age of 65 have individual life insurance policies. Yet for those parents hoping to provide adequate support for their children following a divorce, a life insurance policy can be an excellent way to ensure that a child support obligation is met should the supporting parent die prior to the children reaching the age of emancipation.

Ensuring child support payments as a provision of a life insurance policy is a discussion that divorcing parents should have while formulating their divorce agreement. Whether it’s through extending the benefits offered through an existing policy or by taking out an entirely new policy, parents should ponder these topics when determining their life insurance coverage:

  • If one has existing coverage, will the current payout be enough to meet his or her obligation?
  • Who should be named as the policy beneficiary?
  • Should the payout from a life insurance policy be made in a lump sum, or dispersed through an annuity?

While one would hope to not have to rely on life insurance to pay his or her child support, it benefits both parents to have this discussion during divorce proceedings.