Life Insurance Policies

Term Life Insurance (No Cash Value) Provides coverage for a specific term or period of time, typically between 10 and 30 years. This policy has no cash value component—it’s designed purely to give your beneficiaries a payout if you die during the term.

• You pay your monthly/quarterly/yearly premium and the only money or payout you see is if someone dies, at which point, the insurance company will pay out the policy’s face value. If the policy expires before your death or you live beyond the policy term, there is no payout. You may be able to renew a term policy at expiration, but the premiums will be recalculated based on your age at the time of renewal.
• Nearly all life insurance offered through an employer is Term, because you are only insured for the “term” you are working for that employer. 
• Other names: Pure Life, Survivors Insurance,

Whole Life Insurance (Cash Value) – Whole life insurance guarantees payment of a death benefit to beneficiaries in exchange for level, regularly-due premium payments. However, unlike Term life insurance, Whole insurance includes a savings portion, called the “cash value,” alongside the death benefit. In the savings component, interest may accumulate on a tax-deferred basis. Growing cash value is an essential component of whole life insurance.

• You pay your monthly/quarter/yearly premium and a portion of the premium (and subsequent interest) essentially builds up. When you die, they pay out the death benefit amount, but in the interim, there is also a cash value amount that you can borrow against in the form of a loan or withdrawal.
• A cash value life insurance policy is similar to a retirement savings account in that it allows investments to accumulate tax-deferred interest.
• Other names: Ordinary, Universal, Permanent,

Why do we care what type of life insurance someone has?

For the purposes of divorce, we need to be aware of all debts and assets. Whole life insurance is an asset because it has a cash value. That’s why we need to clarify if a policy is whole or term and if it’s whole, what the cash value is. Then, when putting together the DA sheet, we group whole life insurance cash values in with retirement/investment accounts section.

For the purposes of child support, there can sometimes be situations where someone wants the party who is paying child support to keep a term life insurance policy with the other party as the beneficiary. That way, if the person dies before the kids are emancipated (18/graduated from high school) the other party will get a life insurance payment to make up for the child support payments they will no longer be receiving. KH doesn’t do this a lot, but some other attorneys do. Usually that language will read something like this:

 LIFE INSURANCE TO SECURE CHILD SUPPORT.  As long as Husband has a child support obligation to Wife, he shall maintain a policy of insurance on his life, naming Wife or a trust as the primary beneficiary thereon with a death benefit in the amount of $______________/with a death benefit at least sufficient to fund his remaining child support obligation.  The amount is subject to reductions annually with the decrease in future support obligations.