| ||||||||||||
Divorce settlements cover a lot of ground: The division of property, child custody, and child or spousal support. While the terms of their agreement may sit well with both parties in court, it isn’t always clear that a loss of income due to disability down the road could leave all involved in a financial lurch, a risk that can potentially be mitigated with disability income insurance.
Many divorce decrees require life insurance to protect against a total loss of alimony. But oftentimes, the potential for an extended disablement and its consequences get overlooked. (Related: The role of life insurance in divorce)
Indeed, if the breadwinning spouse should lose their job, the monthly payments they committed to could in some cases be renegotiated and reduced — or even halted temporarily. Similarly, if the spouse who earns less loses their job, the courts could potentially require the working spouse to kick in more during the period of unemployment to help their children maintain their standard of living.
One of the biggest potential threats to both spouses’ financial security, however, is a long-term or permanent loss of income due to disability.
“Divorce agreements typically hinge on several factors, one of which is an equitable division of marital assets,” said Chad Tourin, an attorney and associate managing director of Coastal Wealth in Ft. Lauderdale, Florida. “Common marital assets include things such as real estate, retirement plans, and investment portfolios, but quite often the largest asset any of us will ever have is our ability to earn an income.”
During divorce proceedings, he said, attorneys and financial professionals often focus on current income and overlook earnings potential. For example, the economic value of a 32-year-old who makes $100,000 per year and gets divorced is not $100,000, but rather $3.5 million — $100,0000 X 35 years until age 67.
“The biggest problem when ignoring the full economic value of a divorcée is that many of the agreements in the divorce could fall apart if income were to suddenly stop due to an extended disabling illness or injury,” said Tourin. “Orders for alimony, child support, etc. could become meaningless because it would be impossible for the divorcée to make those payments.”
One solution: Include language in the divorce contract that requires the working spouse (or both, if both are working) to maintain disability income (DI) insurance coverage to protect each other’s interests, with reasonable reserves maintained to pay the premium in the event of a temporary period of unemployment, sickness, or injury.
Connect with a MassMutual financial professional
The benefit of disability income insurance coverage
Disability income insurance is designed to replace a portion of your income if you are unable to work due to a qualifying illness or injury.
Few Americans have the savings to support themselves when they’re not producing a paycheck. In fact, nearly 75 percent of of workers in America reported that they would experience financial hardship if their paychecks were delayed by even a week, according to the 2024 report from the American Payroll Association.1And that does not include the elevated costs associated with a disabling condition.
Indeed, evidence suggests that people with disabilities incur substantial extra costs of living due in part to higher health care bills and expenditures on assistive devices, personal assistance, and rehabilitation. They may also spend more on transportation and food for special diets. Housing costs may be affected, as well, because of needed modifications for accessibility or because they must pay higher rents to live near workplaces, health care facilities, or accessible transportation.2
While many adults (particularly parents) make life insurance coverage a financial priority, few appreciate the need to maintain disability income insurance to protect their income stream — despite the fact that adults in the U.S. are far more likely to experience a disability than they are to die prematurely.
According to the Social Security Administration, 1 in 4 of today’s 20-year-olds will suffer either a temporary or permanent disability before reaching retirement age3. As a result, they may need to rely on Social Security disability benefits for income support, which is often insufficient to maintain their prior lifestyle. (Related: Life insurance and disability income insurance: Why you need both)
Disability Income insurance and divorce
Disability Income (DI) insurance is often overlooked in cases of divorce, said Tourin, because most attorneys have the mistaken belief that such policies only pay out if someone were permanently and totally disabled.
“However, most quality individual DI policies with a ‘true own occupation’ definition of disability will pay benefits if the individual can no longer perform the material and substantial duties of their chosen occupation,” he said.
In effect, this means that if the divorcée were unable to continue working in the career for which they were trained due to health issues like back problems, a stroke, or a mental health condition such as depression, their DI insurance benefit would potentially replace part of their income and position them financially to continue making the agreed-upon alimony and/or child support payments to their ex-spouse.
Larry Singer, a partner and financial professional with New Jersey Life & Casualty in Livingston, New Jersey, said he asks all his clients in the midst of divorce to consider DI insurance coverage.
“The legal system is very good at writing divorce agreements, but not so good at securing these important financial agreements that set the stage for the rest of your life,” he said. “Alimony and child support may be crucial to maintaining a divorcée’s lifestyle for herself — sometimes, himself — and any children. We all know that our lifestyles are supported by a thin thread, which is our ability to earn a living.”
Divorcées who can’t convince their support-providing ex-spouse to purchase DI insurance on their own may need the court to step in, as ex-spouses don’t have an insurable interest in one another. Indeed, insurance companies often require the insured go through underwriting and may also require them to be the owner of the policy.
In cases where the supporting ex-spouse doesn’t want to get a DI insurance policy, Singer said, the parties might instead agree during divorce proceedings to earmark a portion of their alimony payments so that the working spouse purchases a DI policy and names the non-working spouse as beneficiary. And the court order should state the policy cannot be discontinued or changed.
In some cases, said Singer, this arrangement might even be ideal because the spouse receiving financial support might not have assurance that their ex-spouse was paying the premiums or changed the terms of the policy.
“You can’t, as is said, squeeze water from a stone,” said Singer. “But you can ensure that alimony and child support will continue regardless of a disabling event, which is otherwise outside of our control.”
During negotiations, he said, the spouse collecting alimony and child support payments should be aware that Group Long Term Disability (LTD) insurance coverage offered through their ex-spouse’s employer may be insufficient.
Why? Group LTD policies may not be portable, meaning that you cannot take them with you when you leave (or get fired from) your job. Many also provide too small a benefit to adequately mitigate financial risk or limit coverage to the employee’s base salary (not including bonuses or commissions). And some Group LTD policies provide benefits only if the policyowner can no longer produce a paycheck at all, including at minimum wage jobs.
A private individual DI insurance policy can be customized to include the kind of protection your household needs.
Divorce proceedings can be costly and complex. Many couples seeking to sever ties hire an attorney to protect their financial interests. As negotiations get under way, you may also wish to consult a financial professional to help determine whether disability income insurance coverage makes sense for you.
Since 1851, MassMutual has been focused on helping people secure their financial future and protect the ones they love. That mission is why we have over 7,500 financial professionals to assist you on your journey through insurance, investing, retirement planning, estate management, and more. You can find a MassMutual professional with this tool or you can let us know you’d like to talk to one and we’ll have one of our financial professionals can contact you.
Discover more from MassMutual…
Is disability income insurance worth it?
How to stay fit with a physical or mental disability
Disability income insurance: How to use it
This article was originally published in August 2021. It has been updated.
______________________________________
1American Payroll Association, “Getting Paid In America,” September 14, 2022.
2 Frontiers in Rehabilitation Sciences, “Estimating the extra disability expenditures for the design of inclusive social protection policies,” July 31, 2023.
3 Social Security Administration, 2025 Fact Sheet.”
.jpg)
