Just In Case: Life Insurance as Supplemental Child Support
Child support orders are made by taking a lot of factors into account and applying a huge, legally-ordained formula that filters those factors together and comes to an amount that must be paid each month. But as powerful as that formula is, the one thing it cannot take into account is the passage of time, and how likely it is that circumstances will change significantly as time passes. It can wreak havoc on a support-receiving parent if the support-paying parent suddenly gets fired or disabled — but even in those cases, there’s generally some money coming in.
But what happens if your ex passes away? It’s not like their death suddenly makes the child you are raising cost less, but it’s not like they can pay, either. And while the situation isn’t statistically likely, the 1% of single parents whose support-paying ex up and dies isn’t terribly helped by the fact that there’s only 1% of them.
Enter the “Supplemental Child Support” Insurance Policy. (That’s not a real product; it’s just an insurance policy taken out with the express purpose of covering child support in case of the genuine worst-case scenario.)
It’s not difficult to calculate the amount of money a child will reasonably need in order to make it to adulthood; that’s part of what the child support formula is intended to accomplish. And if you have a ‘target amount’ that you need to be able to meet, it’s not that difficult to take out an insurance policy for that amount.
The policy doesn’t need to be complicated. It’s not intended to be an investment vehicle, so there’s no reason to choose a complex Whole-Life policy. A simple, static Term Life insurance policy — with a Term of “until the child turns 25” — will require you to pay a relatively small amount of money each month, and if your ex should shuffle off his or her mortal coil, you will collect enough money to pay for your child to grow up and move out.
If your ex manages to survive long enough for your child to move out and start their own life, sure, you’re out several whole dollars a month…generally speaking, a small price to pay for not having to deal with the worry that your child support payments will just up and vanish. If you think ahead, you may even be able to petition your Michigan family court judge to work the life insurance policy into the divorce agreement, at which point you can potentially even split the cost of the policy.
There are lots of ways that dealing with child support payments can be a pain — save yourself a massive potential heartache with the simple step of taking out a small insurance policy in your exes’ name.
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