How Much Life Insurance is Enough? Or Too Much?

February 20, 2014 § 6 Comments

The chancellor ordered Bill Coggins to pay his ex, Alicia, $540 a month in periodic alimony. He also ordered Bill to make Alicia the beneficiary of $175,000 in life insurance on Bill’s life ” … to insure the payment of alimony in order to compensate [Alicia] and allow her to to survive …” if Bill should predecease her.

Bill appealed, complaining that the life insurance requirement was “excessive considering its purpose,” as in Johnson v. Pogue, 716 So.2d 1123, 1134 (¶41) (Miss.App. 1998).

In Coggins v. Coggins, decided Febarary 11, 2014, the COA agreed and reversed the chancellor’s ruling. Judge Maxwell wrote for the majority:

¶35. An alimony payor “may be required to maintain life insurance in an amount sufficient to satisfy payment of alimony obligations that survive the payor’s death.” Bell, Mississippi Family Law § 9.08[4][c] (citing In re Estate of Hodges, 807 So. 2d 438, 442-44 (¶¶14-23) (Miss. 2002)). The key phrase is “alimony obligations that survive the payor’s death.” ¶36. Periodic alimony is an obligation that “terminates automatically” upon the payor’s death and cannot be imposed upon the payor’s estate, absent an express agreement. Armstrong, 618 So. 2d at 1281; see In re Hodges, 807 So. 2d at 443 (¶19). While lump-sum alimony fully vests at the time of the divorce judgment, periodic alimony only vests on the date each payment becomes due. In re Hodges, 807 So. 2d at 442 (¶17). So when the payor dies, the only alimony obligations that survive—and the only obligations that may be insured—are unpaid lump-sum alimony and unpaid periodic-alimony payments that have already vested.

¶37. Recognizing the possibility that an alimony payor may fall behind in periodic-alimony payments and then die leaving those vested payments unsatisfied, this court has acknowledged the chancellor’s authority to require the alimony payor to maintain a life insurance policy to protect the recipient spouse against such a contingency. Pogue, 716 So. 2d at 1134 (¶41); see also Beezley v. Beezley, 917 So. 2d 803, 808 (¶17) (Miss. Ct. App. 2005). But in Pogue, this court found that requiring the payor to maintain a $75,000 life insurance policy to protect against the potential failure to make $500-per-month alimony payments was “excessive.” Pogue, 716 So. 2d at 1134 (¶41).

¶38. How much more excessive then is the requirement that Bill designate Alicia as the beneficiary to $175,000 in life-insurance proceeds to protect against Bill defaulting on his $504-per-month alimony payments and then dying before curing the default. This amount of insurance—the equivalent of thirty years worth of alimony payments—assumes not only that Bill may fall behind for three decades but also that Alicia will experience no material change of circumstances altering or terminating her need for alimony. Such an amount is unreasonable. Even when we factor in the unpaid portion of the $25,000 hybrid property settlement/lump-sum alimony obligation that has vested to Alicia, we find requiring Bill designate Alicia receive seven times that amount upon his death is still excessive.

¶39. We remand for the chancellor to consider whether requiring Bill to designate Alicia as a beneficiary is necessary to protect against the alimony obligations that may survive Bill’s death. If the chancellor determines the designation is necessary, he should require Bill to designate Alicia as beneficiary to a portion commensurate to those potential obligations.

There must be proportionality between the amount of alimony reasonably expected to come due and the amount of life insurance to protect that amount. The only guide we have from the case law, however, is that for $500 monthly alimony $75,000 is too much, and $175,000 is ‘way too much.

Do you always include a prayer in your divorce pleadings for life insurance to secure child support, alimony, and other obligations? And do you have your client and possibly other witnesses testify about the need for it? If you don’t do either or both, you should start.

And don’t overlook marshalling some proof about what the cost of the life insurance will be. I have denied that prayer for relief because I had no idea from the evidence in the record what the premiums would cost the paying party.

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