By Jeffrey A. Landers, CDFA®, CDLP®
If your ex-spouse becomes seriously ill or injured and can no longer work, the alimony payments you depend on could be reduced, suspended, or eliminated entirely. There is no automatic protection that kicks in. No government program replaces what you lose. And unlike a death, where life insurance provides a clear backstop, a disability can drag on for years, creating prolonged financial uncertainty with no obvious resolution in sight.
This is one of the most overlooked risks in any divorce settlement. Most people negotiate hard for the right amount of alimony and then assume it will keep coming. What they don’t always think through is what happens if the paying spouse loses the income that funds those payments. This article explains how courts might handle alimony when a paying ex-spouse becomes disabled, why that process often leaves the recipient exposed, and what you can do to protect yourself before it becomes a problem.
Courts can reduce or terminate alimony when the paying spouse becomes disabled
Alimony is based on the paying spouse’s ability to pay. When that ability changes significantly and for the foreseeable future, the court has the authority to revisit the original order.
If your ex-spouse becomes disabled and petitions the court for a modification, a judge will typically consider:
- The nature and severity of the disability
- Whether the disability is temporary, prolonged, or permanent
- What income the paying spouse still has, including disability benefits, investment income, or other sources
- Whether the paying spouse has made reasonable efforts to find alternative income or benefits
- Your ongoing financial needs as the recipient
If the disability significantly reduces or eliminates the paying spouse’s income, a judge may lower the alimony amount, temporarily suspend it, or in severe cases of permanent disability, terminate it altogether. Courts try to be fair to both sides, but their primary concern is what the paying spouse can realistically afford given the new circumstances. That may not be what you need.
The key phrase here is “significant and ongoing change in circumstances.” A short-term illness or recovery period may not be enough to justify a modification. A permanent disability that ends a career almost certainly will be.
SSDI benefits do not reliably replace your alimony
When a paying ex-spouse becomes disabled and qualifies for Social Security Disability Insurance (SSDI), many recipients assume the alimony will simply continue to be funded from those benefits. It’s more complicated than that.
SSDI payments can technically be garnished to pay alimony. So in theory, if your ex receives $2,200 per month in SSDI benefits and owes you $1,800 in alimony, a garnishment order could direct that money to you. But there are two problems with relying on this.
First, SSDI benefit amounts are based on the paying spouse’s earnings history and are often much lower than their pre-disability income. If your ex was earning $120,000 a year, their SSDI benefit may be a fraction of that, and the court will factor that reduced income into any modification decision. Your alimony could be cut significantly even if garnishment is technically possible.
Second, SSDI benefits are notoriously difficult to get and can take months or years to be approved and start paying benefits. During that period, your ex may genuinely have no income, making it nearly impossible to collect anything regardless of what the order says.
Supplemental Security Income (SSI), the other major federal disability program, cannot be garnished at all for alimony payments. If your ex qualifies only for SSI, court-ordered garnishment is not available to you.
The scenario most people don’t plan for
Here is the situation that plays out more often than most people expect. Your divorce has been finalized. The settlement includes alimony for several years. You built your budget around that income. Maybe you were even able to keep your marital home based upon that anticipated income. Two or three years later, your ex-spouse is in a car accident, or is diagnosed with a serious illness, and stops working. They file a motion to modify alimony. The court reviews their finances, finds that their income has dropped substantially, and reduces your alimony. Maybe by half. Maybe more.
You had no warning this was coming. You have no insurance payout to fall back on. And the legal process to contest the modification costs you time and money with no guaranteed outcome.
This is not an unlikely scenario. Disability affects working-age adults far more frequently than most people realize. According to Social Security Administration data, more than one in four workers who are 20 years old today will experience a disability that lasts a year or more before they reach retirement age. That risk does not disappear after a divorce.
Disability insurance is the protection almost all divorce settlements leave out
Life insurance to secure alimony is increasingly common in divorce settlements. Disability insurance is not, and that gap leaves recipients exposed to a risk that is actually several times more likely than death during the working years.
A disability insurance policy on the paying ex-spouse, structured to fund alimony payments if the insured cannot work due to illness or injury, directly addresses this scenario. If the paying spouse becomes disabled and their income drops or disappears, the disability policy pays a benefit that can be used to continue making alimony payments to you.
There are a few things to understand about how this works in practice.
Private Individual disability insurance, not group coverage. Group disability coverage through an employer typically pays 60% of base salary only, and can be modified or canceled by the employer. Individual disability insurance is a private policy that the insured owns, is not tied to any employer, and provides much more reliable protection.
The benefit amount and elimination period matter. Most private individual disability policies pay between 60% and 70% of pre-disability income (including base salary, commissions, bonuses, etc.), after a waiting period (called the elimination period) that typically ranges from 30 to 180 days. The benefit amount and elimination period should be matched to the alimony obligation and your ability to manage a short-term payment gap. The shorter the elimination period, the more expensive the premium payments.
Definitions of disability vary. Some policies, including most group disability policies, pay only if the insured cannot perform any occupation including minimum wage jobs. Others pay if the insured cannot perform their own occupation, which is a significantly better definition for a high-earning professional. The policy language matters and should be reviewed carefully.
The policy should be owned by the right party. As with life insurance, there is a real risk that the paying spouse lets the policy lapse or allows it to be canceled if they own it. If possible, negotiate for ownership of the policy, or at minimum require proof of active coverage on a regular basis as part of your settlement agreement. Unlike life insurance, most insurance companies require the insured to be both the owner and beneficiary of a disability insurance policy. However, there are a few A-rated insurance companies that will allow the soon-to-be ex-spouse receiving alimony and/or child support payments to be the owner and beneficiary of a disability insurance policy on their soon-to-be ex-spouse.
What your divorce settlement should include
The best time to protect yourself against this scenario is during divorce negotiations, before your Divorce Settlement Agreement is finalized. Once the decree is entered, adding new insurance requirements is much harder and typically requires the cooperation of an ex-spouse who has little incentive to agree.
Your settlement agreement should address the following.
- A requirement to maintain disability insurance. The agreement should specify the minimum monthly benefit, the definition of disability required (own-occupation is a must), the elimination period, who will own and be the beneficiary, and who is responsible for paying the premiums. Vague language like “ex-spouse shall maintain appropriate disability coverage” is too vague and hard to enforce. Be very specific.
- Proof of coverage. Require the paying spouse to provide you with a copy of the policy declarations page at signing, and annually thereafter along with monthly, quarterly or annual proof of payment depending on when the premiums are paid. If coverage lapses, you want to know immediately, not when you stop receiving alimony. Some settlement agreements also allow the receiving spouse to pay the premiums directly if the paying spouse fails to do so, with the right to seek reimbursement.
- What happens during the elimination period. For example, if the disability policy has a 90-day waiting period before benefits begin, your settlement should address how alimony payments will be handled during that window. Will the paying spouse be required to fund payments from other assets? Does the obligation accrue as a debt?
- A floor on alimony modifications. In some cases, you can negotiate language that limits or eliminates the paying spouse’s ability to seek alimony modification if a disability insurance policy is in place and paying benefits. An attorney familiar with divorce financial planning can advise whether this is enforceable in your state.
If your settlement is already finalized
If your divorce is already done and disability insurance is not part of your agreement, you have much fewer options, but you are not without any recourse.
You should consult with a divorce financial advisor to model what your financial situation would look like if alimony were reduced significantly, and whether there are steps you can take now, such as building reserves or adjusting your financial plan, to reduce your potential exposure.
If your ex-spouse is already showing signs of health issues and your alimony term has several years remaining, this is worth discussing with a divorce financial professional sooner rather than later.
The bottom line
Alimony is designed to give you financial stability after divorce. But it is not guaranteed. A paying ex-spouse who becomes disabled has a legitimate legal avenue to reduce or eliminate what they owe you, and courts often grant those requests. The protection most people think they have is much more fragile than it looks.
Disability insurance on the paying spouse, structured properly and included in your settlement agreement, closes that gap. It is one of the most important and underused tools in divorce financial planning, and it is far easier to put in place during the divorce process than after.
If you are currently going through a divorce and alimony will be part of your settlement, you need to negotiate to include private individual disability insurance well before any agreement is finalized and signed.
Related reading:
- What happens to your child support if your ex-spouse dies? How to prepare now
- Protect your receipt of support payments with life and disability insurance
Frequently Asked Questions
Speak With a Divorce Insurance Specialist
As divorce insurance specialists, we at Hello Monthly Income™, LLC, work with divorcing people and family law attorneys in all 50 states to structure life and disability insurance protection tied precisely to the obligations in your Divorce Settlement Agreement. We work with a select group of A-rated carriers, and our commissions are paid by the insurance company, so there is no cost and no obligation to discuss your situation.
Schedule your confidential consultation.
Jeffrey A. Landers is a Certified Divorce Financial Analyst (CDFA®) and Certified Divorce Lending Professional (CDLP®). He is the founder of Hello Monthly Income, LLC, a specialized insurance agency helping divorcing individuals nationwide protect their receipt of alimony and child support payments through life and disability insurance.
If you have questions about protecting your alimony payments, contact us here.
