When a divorce decree requires an obligation be secured by life insurance (such as alimony or child support), it can be an easy detail to overlook. In the face of financial disclosures, custody agreements, etc., putting a policy in place seems very easy. Oftentimes, waiting until the last minute leaves little room for hiccups, and getting it wrong can result in delays, added legal fees, and avoidable stress--all of which just compound an already stressful situation.
In Massachusetts, as in most states, courts have clear authority to impose life insurance requirements to secure support obligations. Under Massachusetts General Laws, for instance, judges can order a spouse to maintain life insurance as security for alimony — a ruling affirmed by the Appeals Court (specifically in Braun v. Braun). The court explained that "Our cases recognize implicitly that a judge, in his or her discretion, may order that a party maintain life insurance as security for alimony even where the order for alimony does not continue after the support obligor's death." This authority is why ensuring your policy is structured correctly matters — the requirement isn't a mere formality; it is a court order, which courts take extremely seriously and expect to be carried out precisely and in a timely manner.
We see things go awry in a few ways, and many of them come down to the agent.
Mismatches between underwriter and court timelines
Life insurance policies come in a variety of forms, all of which have different underwriting criteria. Many term- and whole-life policies have 'traditional' underwriting--this means that there is a formal application, followed by requirements such as medical record requests, paramedical exams, prescription drug history searches, and even consumer reports such as motor vehicle history reports and credit history. Depending on the carrier and the insured's health profile, the process can drag on from a few days to several months.
The court system works in facts and deadlines. A divorce decree will, inevitably, have a deadline such as 'within 30 days of the divorce being finalized'. An agent who isn't aware of or disregards that timeline may recommend a carrier or product that may not be in force by the deadline. When a deadline passes without compliance with the court order, the resolution usually involves either negotiation or court intervention, both of which tend to incur additional stress, billable hours, and could result in real consequences for the responsible party.
The fix is simple: making sure the agent working a divorce case is familiar with the process, and asking the right questions up-front. Only with the right information can the agent recommend a product and carrier that fit your goals and timeline, weighing your situation against traditional, simplified issue, and accelerated underwriting options.
Policies that don't satisfy the court order
Divorce decrees are usually specific in what the court wants to see. They may specify a minimum face value, a specific type of coverage (term or permanent), and/or a timeline for how long coverage must remain in effect. An agent who doesn't read the applicable order, isn't familiar with them, or doesn't ask the right questions, can easily write a policy that does not fulfill what the order requires.
This discrepancy may not surface until someone checks the paperwork against the decree--meaning potentially months or years down the line. Fixing it could mean starting over, submitting a new application, new underwriting, and potentially higher costs if the insured's age or health has changed. In the extreme, the paperwork isn't checked until the unthinkable happens, and it's too late to start over.
A more common scenario is a court requiring coverage for a shrinking obligation (such as two children who turn 18 4 years apart). An agent may set up a single, flat, level policy which covers both children until the youngest turns 18. While this isn't wrong per se, it means the client is carrying and paying for more coverage than the decree requires.
In the alternative, a more precise approach would be to select a term and face amount up front that adheres to the decree's requirements. Sometimes this means laddering two policies (a larger policy for the longest term and a smaller policy that ends when the first obligation ends), or revisiting coverage at the step-down intervals to reduce coverage (and, in turn, the premium). Both of these strategies require more work than a set-it-and-forget-it product, but the difference is coverage that actually follows the order and doesn't require the payor to overpay or over-insure.
Historically, decreasing term policies were often used to meet these obligations, but they have largely disappeared. Over the last several years, the cost of level-term premiums has dropped significantly, prompting many insurers to discontinue decreasing-term products, which require more administrative overhead. In most, if not all, cases, a modern level-term product is less expensive than previously available decreasing term products. Today, we accomplish the same thing through insurance planning and policy design, rather than an individual product.
Incorrectly specified owners and insureds
This might be the error we see most often, and it's the one that can undermine the whole purpose of the court order.
Often, the decree intends for the recipient (spouse or child/children) to be able to confirm the policy is in force. If a policy were to lapse without them noticing, they would lose the protection which has been granted to them. In most cases, this means the recipient should be named an irrevocable beneficiary, meaning the designated portion of the death benefit is unable to be changed, removed, or reduced without the beneficiary's written consent. Without this distinction, beneficiaries are subject to change at any time and without prior notice.
If an agent who is used to standard cases defaults to a standard, revokable beneficiary and doesn't ensure the correct designation, the paying party can change the benefit, remove or change the beneficiary, or even let the policy lapse, without any notice to the other side. Some decrees try to mitigate this by requiring annual proof of coverage be provided, but a good agent should be flagging the beneficiary designation and ensuring the receiving party is protected in the spirit of the court's order.
It's important to note that employer-provided group life insurance can cause another wrinkle. Employer policies generally fall under ERISA, which supersedes state law, wills, and divorce/separation agreements. If the court order says the children get the proceeds, but the HR file says it goes to someone else, the policy will typically pay who HR's records reflect. There are exceptions to this, and as a non-attorney, I won't address how to overcome it (I know it has something to do with a QDRO, but you'll have to ask your attorney). In any case, a separate, stand-alone policy is the most reliable way to satisfy this requirement.
What it actually costs
None of the issues above show up as a single, itemized bill. They all contribute to the bigger picture, showing up as:
- Additional attorney fees due to having to review paperwork, negotiate updated timelines, file additional motions, appear in court on behalf of their client, etc.
- Court dates due to non-compliance
- Time and delays due to incomplete underwriting or rewritten policies
- The risk of support obligations going unsecured
- A protected spouse having no way to confirm coverage is in place
On their own, these might be small, manageable issues. Combined over the course of a case, they have a real financial impact and take considerable time, neither of which is desirable in a potentially contentious process. Particularly, when this is often considered an 'easy' requirement by the parties.
What we do differently
When we are dealing with a divorce-related policy, we ask for all the relevant information upfront, including the language of the decree, prior to making any recommendations. We will talk through ownership and beneficiary structure, and ensure the party who is meant to be protected has a meaningful way to ensure coverage is, and remains, in force. We are up-front with attorneys and clients alike when faced with unrealistic underwriting timelines, so everyone is well-informed, and there are no surprises in the 11th hour. We are also sensitive to the communication needs of these cases, and are happy to meet individually or jointly to ensure everyone is comfortable throughout the process.
This isn't a sales pitch, it's our process. We are committed to ensuring a manageable requirement doesn't turn into conflict or additional expenses for either party.
Whether you're a divorce attorney dealing with a life insurance requirement, or a spouse that needs to secure coverage, we are happy to talk through your options. No pressure, no obligation-just a conversation about getting everything right the first time.