In New Mexico, both parents are legally required to provide financial support for their children. When child support is ordered as part of a divorce or child custody dispute, one parent is typically required to make child support payments until their child turns eighteen (18), or until they are nineteen (19) if the child is still in high school. Depending on the timing of the child support order, parents can be paying child support for a very long time.
Given the substantial financial implications of a child support obligation, to both parents and their children, some parents choose to obtain life insurance policies that will pay their support obligation style in the unfortunate even that a parent dies before their child turns eighteen (18). In some cases, the court may actually order a parent to obtain a life insurance policy and to maintain that policy until their child support obligation is completely satisfied.
Life insurance policies are available from a number of different places. Some employers offer life insurance to employees as a standard benefit. An employer-provided life insurance plan may not be sufficient to cover a child support obligation because they tend to have fairly low policy limits. However, employer-provided plans typically allow employees purchase additional coverage through the group plan. The major benefit of purchasing through a group plan is that it may not require completion of a medical examination, provided that the coverage stays under a certain amount.
Parents may also apply to purchase an individual life insurance policy directly from an insurance company. Insurance companies provide full life and term life insurance, and will offer significantly varied amounts of coverage. The insurance company will require a physical examination with a doctor or nurse, so that they can assess the health of the applicant. Any health conditions, along with smoking, will increase the cost of life insurance. Additionally, the cost of life insurance will vary depending upon the age and lifestyle of the insured person.
Once they have obtained life insurance coverage, parents may have several options for choosing the policy's beneficiary. The simple, direct approach is to name the child as the beneficiary of the life insurance policy. The problem with this approach is that it may provide a large lump sum to a child under the age of eighteen (18). Generally, a guardian will need to be appointed to administer the funds on behalf of the child. Then at age eighteen (18), the account must be given to the child outright. In the alternative, a trust fund could be set up and a trustee appointed to administer the life insurance funds. Or, the parent obtaining the life insurance policy may name the other parent as the beneficiary of the policy, which means that any proceeds would go directly to the other parent.
Given how unpredictable life can be, parents should carefully consider the options available for securing child support obligations. Life insurance can be expensive, but can provide both parents with an invaluable level of peace of mind knowing that their child will always be supported. Consulting with an experienced family law attorney is essential in any child support action so that parents on either side can understand their options for securing a child support obligation with a life insurance policy.