Despite traditionally having one of the lowest divorce rates in the world, currently estimated at around 1.1%, India has seen a steady increase in divorce cases in recent years. This trend is attributed to the growing complexities of modern life, as noted in a report by the United Nations.
Divorce is a challenging journey, especially when children are involved. Amidst the emotional and logistical whirlwind, it is quite common to overlook some of the important aspects and one of which is the insurance policies. Yet, reviewing and updating the child’s insurance policies post the couple’s divorce is highly significant.
Here are some of the key reasons why:
Significant financial changes: With separate households post-marriage, the income dynamics shift drastically. This too can considerably affect the ability to pay premiums and maintain the policy coverage. Hence, reviewing the existing policies ensures adequacy in coverage levels. This would also prevent any gaps that could leave children vulnerable in unforeseen circumstances.
Pivotal role in custody arrangements: One of the parents who holds custody may influence who should be the policyholder and who should be the beneficiaries. For instance, if one of the parents is the custodian, they might need to be the policyholder to manage the funds responsibly for the child’s benefit.
Updating beneficiaries is crucial: It has been observed that in many cases, spouses designate each other as beneficiaries. However, post-divorce, such arrangements may not align with the new family structure or intentions. Therefore, it’s imperative to designate beneficiaries accordingly, ensuring that funds are directed as intended, especially for the welfare of the children.
Division of assets: Divorce often involves the division of assets; this also includes the life insurance policies. Reviewing these policies allows for clarity on ownership and responsibilities. For instance, if a policy was purchased jointly, decisions on maintaining, transferring, or surrendering it need to be made with a clear understanding of the implications for both parties and their children.
Health insurance coverage: Another aspect which is often overlooked is health insurance coverage. Many families have joint health insurance plans, but post-divorce, each parent may need to secure individual coverage. Ensuring children are adequately covered under these plans is essential to safeguard their well-being and provide access to necessary healthcare services.
Updating contact information is crucial: In the midst of divorce proceedings, individuals may change residences or contact details. Failing to update this information with insurance providers could lead to communication gaps, potentially jeopardising coverage or delaying vital information in case of emergencies.
In conclusion, considering the emotional toll divorce takes on children, financial stability becomes even more critical. Reviewing and updating insurance policies after the couple has divorced provides reassurance and stability for children amidst the turmoil. It demonstrates a commitment to their well-being and ensures that they remain protected, regardless of the circumstances.
In essence, reviewing and updating child insurance policies post-divorce is not just about complying with legal obligations; it’s about safeguarding the future of the most vulnerable members of the family. It’s about ensuring that despite the changes and challenges, children remain protected and supported, both emotionally and financially. So, take the time to review and update insurance policies—it’s an investment in your children’s security and peace of mind.
Rakesh Goyal, Director, Probusinsurance.com
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Published: 19 Jun 2024, 09:50 AM IST