Divorcing couples risk being left high and dry if future maintenance isn’t insured against job loss, death or default

Divorcing couples are failing to protect future maintenance payments against the risk of an ex-partner losing their job, dying unexpectedly, or refusing to pay, lawyers warn.

Securing regular maintenance payments to cover living expenses and the care of children is a priority in many divorce settlements but without measures such as life insurance cover included, future financial security is far from guaranteed.

Hodge Jones & Allen family law partner Sarah Norman-Scott explains: “When couples split, the lower earner, or primary carer for the children is understandably focused on negotiating a sufficient level of maintenance to cover day to day living costs, outgoings on the family home, school fees or childcare costs. 

“What is often forgotten amidst wrangles over money is the importance of safeguarding those payments. Failure to do this – usually by insisting on the payer taking out the necessary insurance – means if the payer dies unexpectedly, payments can stop overnight. Should they lose their job or their business fails they can apply to the courts to reduce payments in line with their new circumstances, again leaving the family in financial hardship.

“I’ve seen many cases where maintenance levels are reduced because the husband’s earnings have decreased. Insurance would protect against that, especially if his outgoings have increased due to a second family. I’ve also had cases where the ex-partner is moving abroad, making future enforcement potentially trickier and more costly. Again, insisting on insurance can mitigate against that.”

To safeguard future maintenance payments, when negotiating a settlement it is sensible to consider:

• Life insurance policies: Stipulating that the payer is required to take out a life insurance policy for the benefit of their former partner and/or the children. This policy should match the value and duration of the maintenance claim. 
• Critical illness or income protection: Stipulating the payer take out insurance covering the risk of them becoming too ill to work or losing their job.
• Death in service benefit: Check whether an existing work-based death in service benefit can provide sufficient cover instead and if so, that the payer’s ex / and or children are named beneficiaries.
• Secured payments: If there is a significant risk that the paying party might default – perhaps they have a history of not meeting financial obligations – the family courts can stipulate that maintenance is secured against another asset, such as property, adding another layer of security.

Sarah Norman-Scott says: “Divorce can feel overwhelming and negotiations can be tough but the decisions you make during the process will affect your future security for years to come. 

Child maintenance agreements typically last until a child is 16, or even 20 if in full-time education, and spousal maintenance can in some cases cover a whole lifetime, although this is rare. 

A lot can happen in that time and circumstances can change, so building extra security into your divorce settlement by insisting on insurance policies, ensuring you are named in death in service policies or even obtaining additional security through the courts will mean you protect future income and have peace of mind that your needs and those of your children will continue to be met if the unexpected happens.”