Divorce And Insurance: What Are The Important Matters To Be Considered?
Getting into a divorce can be a complex and lengthy process with a variety of emotional, practical, and financial implications for both spouses, and any children that may be impacted. During such a stressful time, it can be easy to overlook basic items like the family’s insurance coverage. Nevertheless, it’s important to review all insurance policies to determine how your coverage may change once the divorce is final and, more importantly, how you can prepare.
The two primary types of insurance that typically come into play during a divorce are health insurance and life insurance.
Health insurance is a type of insurance coverage that pays for medical and surgical expenses incurred by the insured. Health insurance can reimburse the insured for expenses incurred from illness or injury, or pay the care provider directly. It’s common for one spouse to be covered under the other, often higher-earning, spouse’s employer-sponsored health plan.
In case of divorce, it is good to consider that there are now more affordable health insurance options which are available for people who don’t have access to their own employer-sponsored health plan, even if they have pre-existing conditions.
Life insurance can be an important consideration in divorce, especially for anyone expecting to receive spousal support. Spousal support typically stops when the payor is deceased. However, unless the recipient of spousal support inherits other assets to replace the spousal support payments, the stream of payments can be sustained by a life insurance policy on the payor.
Sometimes life insurance is required as part of a divorce settlement. When this is the case, it’s typically best for the recipient spouse to own the policy and make the required premium payments. This way, the recipient spouse retains control over the policy, ensuring that no changes are made or lapses in payment occur without his or her knowledge.
Finally, any life insurance needed should always be put in place before the divorce is final. If the payor spouse turns out to be uninsurable, appropriate modifications to the divorce agreement can still be made. In some states where one spouse has a term life insurance policy and becomes uninsurable, the existing policy may be considered a marital asset.
Like any issue that comes up during a divorce, determining how to handle changes in insurance policies and coverage may not always be as straightforward as they seem. It’s important to be aware of all existing policies going into the divorce, as well as any new policies you may need as a result of the settlement. Since insurance can be a complicated topic with a variety of options, it may be helpful to seek the help of a licensed insurance professional or financial advisor to determine the best solutions.