Those receiving child support or alimony payments rely on that money to pay for their living expenses. Even if the person who pays those support payments (called the payor) always pays on time, a question arises of what will happen to the recipient of those funds in the event of the untimely death of the payor. Life insurance policies are useful in this situation, and are often required, to ensure that the support recipient will continue to receive adequate compensation if the payor dies.
Life Insurance and Alimony
In New Jersey, alimony payments are often secured so that there is a mechanism in place to cover the payments if the payor alimony dies. The rationale is that alimony is awarded because the recipient needs it, and the untimely death of the payor should not unduly affect the financial life of the support recipient.
Amount of Life Insurance Needed to Cover Alimony Payments
The amount of life insurance needed to secure alimony payments can be calculated by multiplying the payment amount by the duration of the alimony payments. Alimony is often ordered to be paid for a limited time rather the indefinitely, either for a set number of years or until a specific event occurs (remarriage of the supported spouse, for example). Since alimony is taxable, you need to deduct the amount of tax to determine the appropriate amount. Continue Reading →