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How Should You Handle Insurance in a Divorce

Divorce

Couples divorcing already have a lot of issues to resolve and caught in all the emotions and lawyers and court is not easy. Here is some advice on how to take care of insurance when you go through this. Usually you put in place insurance policies for protection and because marriage has ended does not mean you no longer need the protection. Actually in certain instances there are children involved and you have to think about how you are going to handle and protect them as well, whether it is health insurance or life insurance. Most couples have health and life and car insurance and if you have a home then you probably have a homeowners policy and of course in some cases there is long-term care, disability insurance as well.

If you have life insurance then you should first check and see who you specified as the beneficiary on your life insurance. Keep in mind if you don’t change the beneficiary of the life insurance after a divorce in case you die and your ex-spouse was the beneficiary then he/she will get the money rather than maybe your current spouse! It is easy to forget life insurance policies in a divorce and sometimes their value is higher than other assets involved. Also as part of the divoce negotiations couples should discuss the division or ownership of the life insurance specially if you own a permanent life insurance. And if there is a life insurance that was taken in order to take care of the children in case of absence of a spouse then you should negotiate the ownership to continue this for the remainder of the years that the children are dependent. In fact divorcing spouses with children may consider even new life insurance to cover the child support, mortgage etc. in case they pass away. In another word one should re-evaluate longer-term financial plans and obligations.

As to health insurance, most spouses carry insurance under one spouse’s employer and therefore they should definitely negotiate and decide the plan during and after the divorce. Usually if you are employed you can sign up for insurance at anytime after a life changing event. However, if you have children then you should definitely determine which spouse will be carrying the responsibility both in terms of insuring as well as payment. Also federal law, COBRA allows a spouse to continue on a spouses plan for a limited time before obtaining different insurance. But that is a rather costly way to carry insurance, or at least evaluate the rates and your options. But in general it is very important not to have a gap in coverage.

As to homeowner’s policy you should make sure coverage is not terminated until all assets are settled. If a spouse stops homeowner’s policy which carries liability and you are on the deed then you have financial responsibility and no protection. And once assets are divided then spouses should notify insurance company to change title on the insurance. All of the above is true for car insurance as well both in terms of ownership and liabilities as well notifications.

If you or your spouse have Long-Term Care Insurance the impact is very little since this type of insurance is usually personal and each spouse can decide to carry and continue their policy.

As to disability insurance it is important to think about it since with custody or alimony payments there is a strain on budgets and in case something happens you want to be able to make ends meet.

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