Can I get a life insurance policy on my child’s father?

Why You Can Own a Life Insurance Policy on Your Child’s Father

Married couples usually own life insurance policies on each other’s lives. The purpose of life insurance is to guard against the risk of financial hardship if the insured dies too soon.

In a household where both spouses work, the loss of either spouse presents obvious problems for the family. If you are married to your child’s father, you may definitely want a life insurance policy to protect you in the event of his untimely death. And he may want to do the same.

If you are not married, then you will have to demonstrate your financial interest in his life. Since you have a child together, this should not be hard to do. Does he pay you child support? Does he help pay for school fees and the like? That gives you an insurable interest in his life.

If you are divorced, the same applies. You both still have financial responsibility for your child. With either one of you out of the picture, there will be a financial impact on the child that a life insurance policy can help to mitigate.

Many divorced couples raise their children together, and, just as if they were married, they must consider how the loss of either of them would affect those children.

This is just one use, but it is probably the primary use, of life insurance.

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The Issue of Informed Consent and Qualifying

It’s important to note that the proposed insured must agree to the insurance policy. You may open the policy, and you may pay the premiums, but the person whose life will be insured must be a willing party.

You cannot legally take out an insurance policy on a person over 16 years old without their knowledge and informed consent.

Unless you specifically seek out a policy that offers a non-medical option, which you will pay dearly for, they will have to take a medical exam in order to qualify for the policy. That’s a pretty hard thing to accomplish without their knowledge.The issue of qualifying is a big one.

Obviously, the better health and general shape your child’s father is in the easier and cheaper it will be to insure his life.

The younger he is, the less the policy will cost. If he smokes, you will automatically pay more.

If his driving record is too spotty, he may not seem like a good risk to an insurance company. Insurance companies are in the business of assessing, and then managing, risk. They do not knowingly insure daredevils.

Does he regularly take medication of any kind? What for? This is all public information now, so it must be disclosed.

Interestingly enough, an uncertain diagnosis can be even more of a liability than a definite illness that an insurance company would much rather deal with a certainty than with the unknown.

Be Sure to Get Enough Insurance

Once you and your child’s father agree that it makes sense to get a policy, be sure to work with a licensed pro to make sure you get enough.

One of the biggest mistakes people make is not using the appropriate calculus for deciding how much life insurance to get.

What do you need it for, after all? To replace the income of the deceased, right? That income pays for all your debts. It pays for a mortgage.

You may be counting on it to fund the children’s 529 College Savings Plan, and then to get them through four years of college. It might have paid for your child’s wedding.

So, in the absence of either one of you, how much insurance is required to make sure all those dreams can still come true? That’s a hard number, and an insurance agent can help you with that formula. Do not pick a number out of a hat.

Avoid the mistake made by so many of paying for years on an insurance policy that ends up to be wholly insufficient when it is finally needed.

Are you familiar with all the different kinds of life insurance? Do you know all the different ways those policies are used, by both individuals and businesses, to protect income and assets?

If not, pick out a licensed life insurance agent from a reputable company and give them a call (ask a friend for a referral). Ask a lot of questions. Make sure you understand what you are buying. Do not rush into a buy decision until all your questions have been answered.

A solid one-third of Americans do not have enough life insurance coverage. The measure for underinsurance, according to the National Bureau of Economic Research, is whether or not the family can maintain its standard of living after the death of either spouse.

For more than one in three Americans, the answer to that question is no.

Tax Treatment of Life Insurance

The reason to own your child’s father’s life insurance policy is the same reason you might want him or someone else in the family to own yours. It has to do with taxes.

If you own your own policy, then when you die it will be considered part of your estate.

This means it will have to go through the legal process called “probate” and the beneficiaries will have to pay estate taxes. This is avoidable.

The simplest way to avoid it and to make sure your beneficiaries receive term life insurance proceeds tax-free is for you and your spouse or significant other to “cross-own” each other’s policies.

There are more complicated ways, called “irrevocable life insurance trusts,” or ILITs, and for these, you will require the help of an estate attorney. There are pros and cons to both choices.

Building Your Pro Team

At the end of the day, a few consultations with your financial advisors will tell you what you need to know to get started. Call your pro team and get their take on how to accomplish the goal you and your child’s father are trying to achieve.

These may be, for example, your accountant or CPA, your broker, and your insurance agent.

These are the professionals you should have at hand anyway, which is to say, a phone call away and whom you should meet with at least once a year to review your overall financial plan.

Each of these professionals brings a different expertise to the conversation, and none can speak for the others. Be sure to solicit a range of advice, and understand the landscape of choices, before leaping to a decision.

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