Monday, July 13, 2009

Disability Insurance in Divorce Agreements

In divorce proceedings and negotiations, if permanent or limited duration alimony, as well as child support is a component of the possible settlement agreement, life insurance for the benefit of the dependent spouse and children is a consideration and usually made part of the paying spouse’s continued obligation. In fact, the New Jersey Legislature has specifically allowed for life insurance to be ordered by the judge to protect the dependent spouse in case of premature death of the payer spouse under N.J.S.A. 2A:35-25. The theory behind this additional insurance premium burden upon the payer spouse is that the untimely death of the payer spouse should not become the burden of society to support the dependent spouse and children. However, there are no requirements regarding disability insurance in divorce settlements. A payer spouse is not under any obligation to obtain and maintain a disability insurance policy for the benefit of the dependant spouse or children. However, NJ Family Law & Divorce Mediation strongly encouages inclusion of disability insurance as part of an overall divorce settlement.

Disability insurance is a voluntary insurance policy which pays monthly benefits to the insured if he or she becomes disabled by a covered risk and will still pay only a portion of the injured spouse’s gross employment earnings. We’re all familiar with the commercial of the quacking duck exclaiming AFLAC to all that would listen, yet most people don’t have disability insurance. Those few who have coverage seem to acquire it through their employers. Since the legislature failed to include provisions for disability insurance protection for the dependant spouse and there are no New Jersey divorce court cases which deal squarely with this issue, NJ divorce attorneys representing payer spouses generally do not allow a disability insurance provision to be included in the divorce settlement agreement. The failure of NJ divorce attorneys to look long term for their clients real needs may be a detriment to their clients.

The consequences of not having a disability insurance policy in place on the payer spouse could cause severe economic hardship to both spouses and their children. Generally, when an individual becomes disabled because of a non work related injury such as by a medical condition; heart attack, stroke, cancer to name a few disabling illnesses, the payer spouse’s recourse is to seek Social Security disability benefits. These benefits only provide for a small fraction of the payer spouse’s prior employment income. The reduced funds available to the payer and dependent spouse are further burdened by the likelihood of increased medical bills.

Insurance is always a gamble. Premiums are paid for coverage for a possible future occurrence. In some instances, government requires us to purchase certain types of insurance such as liability coverage on our automobiles in case we damage property or inflict injury upon someone. In other matters, our mortgage lender requires fire and casualty homeowner’s insurance should the house catch fire or is damaged by harsh winds. With the long term view toward protection and stability, divorcing couples and their respective attorneys should seriously consider the possibility that the payer spouse may become disabled during the alimony and child support obligation periods.

Although a payer spouse may be reluctant to pay additional insurance premiums for the benefit of his ex-spouse, there is a strong possibility that the payer spouse would look more favorability to providing protection and stability to the children and himself. Disability insurance is affordable and can be obtained in different coverage amounts, such as the amount equal to the cost of the monthly child support payment or just the cost of the monthly alimony obligation. Disability insurance must be a topic for discussion during the active divorce settlement talks so that the divorcing couple may fully understand the possible future scenarios which can adversely affect them. At Montclair Divorce Mediation, the discussion of disability insurance for the protection of the family is part of the framework for divorcing clients to consider incorporating into their divorce agreement.


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  2. Very interesting article. As someone suffering with disabilities myself, one of the most daunting things about being diagnosed was trying to figure out how the loss of income would prevent me from keeping the lifestyle I had worked so hard to achieve. Disability Insurance for individuals is important to consider; while people always seem to remember insuring their homes and cars, they forget that if your health were to take a turn for the worse, your income would likely suffer. Though we don't know what life will throw at us next, we can be prepared for the unexpected by protecting our income!

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  5. Hi guys,

    Really, this is good information for all. The disability insurance provides gives different types of coverage. It provides better solution for students, self-employee and unemployed person. Thanks.

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  8. Divorce terminates the legal responsibility of the husband to his wife and vice versa. Therefore, I conclude that the payer's spouse will be legally deprived of the disability benefits. However, they aren’t relieved of their responsibility as parents. The children are still the beneficiaries of the payer, even though the couple is divorced. The divorced payer can consult lawyers who specialize in social security law to assure that their child/children receive what they are entitled to. :)

  9. It is very helpful information to know more about disability insurance specially in divorce agreements. Compass Claims is good insurance company which is providing insurance services.

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