Post-Divorce Insurance Considerations

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A divorce brings significant changes, and it takes time for individuals to reorganize their affairs.  Insurance coverage will commonly change when a divorce takes place, and potential issues and increased financial obligation should be recognized and prepared for in advance.

Medical Insurance

In most cases, insurance coverage for children will not be interrupted as they will be eligible to continue coverage under either parent’s employer’s health insurance policy.  The parent providing insurance coverage for the children is not required to be the custodial parent. In any case, as part of the divorce settlement, insurance coverage for the children should be clearly defined.

On the other hand, new divorcees typically must seek new coverage once a divorce is finalized. Those who had insurance provided by their spouse’s employer, and who do not have access to their own employer’s insurance plan, must replace that coverage.  Though generally a more expensive option, COBRA is available to an employee’s ex-spouse for up to 36 months following a divorce. For many individuals, private insurance is the preferred, more cost-effective option.

Life Insurance

After a divorce, beneficiaries of life insurance policies should be reevaluated and appropriately changed.  While most married couples with life insurance list their spouse as the beneficiary, this may or may not be appropriate after a divorce.

Divorcees may mutually agree that a life insurance policy for one or both individuals is appropriate to replace child support or maintenance payments, or to cover additional child care expenses in the event of the death of their ex-spouse.

Auto and Home Insurance

Securing individual insurance policies for auto and residence should be a priority following a divorce. Being without insurance even briefly can have serious consequences. Also, taking out new, separate insurance policies provides protection from financial responsibility should there be rate increases due to claims submitted by an ex-spouse.

Disability Insurance

New divorcees may want to consider the benefits of purchasing disability insurance. In the event of illness or injury that prevents an individual from working, disability insurance provides wage replacement benefits. Without a spouse’s income to rely on in this situation, a newly single person may welcome the peace of mind that disability insurance offers.

Divorce related insurance issues and concerns should be discussed in detail with an attorney before a divorce is final. An attorney will advise whether circumstances warrant including specific agreements regarding insurance within the divorce documents and guide clients toward appropriate insurance decisions.