Now there’s insurance to really help separated parents and children
Critical Illness or the death of a supporting spouse will change a child’s life. To financially support your child(ren) means securing support payments with insurance. Now there’s a policy available to help separated and divorced ex-spouses and children secure their financial future. It was created by a Toronto firm called Come To Agreement, in partnership with seven of Canada’s leading Insurance companies. The policy is low cost and responsible. It’s called Rebalancing Beneficiaries Support Insurance (RBSI).
The policy benefits both the holder and the beneficiary
RBSI is a new way to appropriately secure support payments that’s fair to all parties. The policy secures payments for child support, children’s current and future special expenses, alimony or spousal support, and any equalization or debt repayments, upon the death of the policyholder. The beneficiary receives what she/he is legally entitled to while other beneficiaries can share in the remaining proceeds. Integrating insurance law with family law, the policy is designed to be a win/win for both the policy holder and the beneficiary.
The policy provides child and spousal support, as well as other agreed to payments between parties that need to be secured.
RBSI covers five different criteria:
- Child Support. Under the policy, child support changes as children get older. It ends at age 18 if the child does not continue her/his education past secondary school. However, if the child continues his/her education to earn a post secondary degree, the parents have an obligation to look after the child financially during this period. The policy is adjusted for each child as that child gets older, based on what the parents have agreed to cover.
- Children’s Special Expenses. The policy covers anything that is over and above basic child support. This could be prescription drugs, piano lessons, hockey, swimming lessons or camp, for example.
- Future Children’s Expenses. This includes anything that the parents agree to contractually for the future; for example, university or college tuition; or medical coverage for children with severe disabilities, since parents have a legal obligation to look after their disabled children beyond the age of 18.
- Spousal Support. Sometimes referred to as Alimony, Spousal Support is the money that one spouse may have to pay to the other spouse for financial support following a separation or divorce.
- Any other agreed to payments between parties that need to be secured. For example, if one spouse stays in the matrimonial home, and can’t afford to give the other spouse money for that party’s share of the home, there may need to be life insurance taken out to cover that portion until the party owed gets paid. Another example is debt repayment between the two parties that needs to be secured.
Calculating the amount of insurance required
Come To Agreement provides a Calculator to determine the amount of Rebalancing Beneficiaries Support Insurance needed. There are three steps involved in the process:
Step 1: Review all of the above five categories in order to determine how much insurance should be built into the agreement. Cost of Living Adjustments (COLA) is typically included as well. In addition, critical illness insurance can be added to cover support payments in the event that the support payer becomes ill, can no longer make a living, and cannot make payments based on the illness.
Step 2: Request a quotation from Come To Agreement. The firm will provide a quotation form that either the client or the client’s lawyer can fill out and send back to the firm. This will provide the information with enough general information to get started.
Step 3: Come To Agreement creates a Rebalancing Beneficiaries Designation Form and Schedule. This is a beneficiary form that has a declining balance for the support beneficiary. Each year, on the anniversary date of the policy, the beneficiary amount owed rebalances.
So, for example, if one spouse is going to provide support payments to the other spouse amounting to $10K a year for 10 years, and there are no Cost of Living Adjustments, the paying spouse would need to have $100K of life insurance. However, if the paying spouse dies after eight years, that spouse owes $20K to the support beneficiary, not $100K. The $100K has a declining value for the support beneficiary, and, if written into the beneficiary form originally, has an increasing rebalancing for other beneficiaries who could be on the policy, e.g., children, or a new partner or spouse.
The end result is that the paying spouse has met the support contractually agreed to. And the beneficiary receives it. At the same time, the paying spouse, upon dying before the insurance term is completed, has left a portion of that money on the insurance policy to other designated beneficiaries.
Talk to us about your Support Insurance needs
At Howard Nightingale Professional Corporation, we use the Rebalancing Beneficiaries Support Insurance policy, when appropriate, to assist co-parents of separated or divorced families. To make the best insurance decisions regarding your specific situation, book a free initial consultation with us by calling our Toronto office at 416-663-4423 or toll free at 1-877-224-8225.