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Divorce can be a long and complex process, with various emotional, practical and financial implications for both spouses, as well as for all children likely to be affected. During such a stressful time, it can be easy to forget about basic elements such as family insurance coverage. Nevertheless, it is important to review all insurance policies to determine possible changes to your coverage once the divorce is over and, most importantly, how to prepare.
The two main types of insurance that usually occur during a divorce are health insurance and life insurance.
Health insurance
It is common for one spouse to be covered by the other employer-sponsored health plan, which is often more remunerative. The Consolidated General Budget Reconciliation Act (COBRA) was pbaded in 1986 to help spouses who do not earn income after the divorce, thus allowing them to continue to benefit from the coverage of their former employer for up to three years.
Although COBRA may be a practical bridge in the coverage, it is not usually the most cost-effective solution for the spouse who pays the premiums, which are usually the share of the premium paid by the employer and by the employee, plus 2% extra for administrative costs. In addition, the three-year limit is at best a short-term solution. With the pbadage of the Affordable Care Act in 2010, more affordable health insurance options could now be offered to individuals who do not have access to their own employer-sponsored health plan, even if they have pre-existing conditions. These options are worth exploring before you sign up for COBRA.
Life insurance
Life insurance can be an important factor in a divorce, especially for people who expect to receive support. Spousal support usually ends when the payor is dead. However, unless the recipient of the support inherits other badets to replace spousal support, the flow of payments may be fed by a payer's life insurance policy.
Sometimes life insurance is required as part of a divorce settlement. In this case, it is generally preferable for the beneficiary spouse to own the policy and make the required premium payments. In this way, the beneficiary spouse retains control of the policy, ensuring that no changes are made or that no payment is made without his knowledge, without his knowledge.
Finally, any necessary life insurance should always be taken out before the divorce is pronounced. If the paying spouse turns out uninsurable, the appropriate changes 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 can be considered marital property.
As with any problem that occurs during the divorce, figuring out how to handle insurance policy changes and coverage may not be as simple as it seems. It is important to know all existing divorce policies, as well as any new policies you may need as a result of the settlement. Because insurance can be a complex subject with many options, it can be helpful to use a licensed insurance professional or financial advisor to determine the best solutions.
To find out more, contact my colleague Beth Mayfieldand stay tuned for our next white paper on this topic.
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Divorce can be a long and complex process, with various emotional, practical and financial implications for both spouses, as well as for all children likely to be affected. During such a stressful time, it can be easy to forget about basic elements such as family insurance coverage. Nevertheless, it is important to review all insurance policies to determine possible changes to your coverage once the divorce is over and, most importantly, how to prepare.
The two main types of insurance that usually occur during a divorce are health insurance and life insurance.
Health insurance
It is common for one spouse to be covered by the other employer-sponsored health plan, which is often more remunerative. The Consolidated General Budget Reconciliation Act (COBRA) was pbaded in 1986 to help spouses who do not earn income after the divorce, thus allowing them to continue to benefit from the coverage of their former employer for up to three years.
Although COBRA may be a practical bridge in the coverage, it is not usually the most cost-effective solution for the spouse who pays the premiums, which are usually the share of the premium paid by the employer and by the employee, plus 2% extra for administrative costs. In addition, the three-year limit is at best a short-term solution. With the pbadage of the Affordable Care Act in 2010, more affordable health insurance options could now be offered to individuals who do not have access to their own employer-sponsored health plan, even if they have pre-existing conditions. These options are worth exploring before you sign up for COBRA.
Life insurance
Life insurance can be an important factor in a divorce, especially for people who expect to receive support. Spousal support usually ends when the payor is dead. However, unless the recipient of the support inherits other badets to replace spousal support, the flow of payments may be fed by a payer's life insurance policy.
Sometimes life insurance is required as part of a divorce settlement. In this case, it is generally preferable for the beneficiary spouse to own the policy and make the required premium payments. In this way, the beneficiary spouse retains control of the policy, ensuring that no changes are made or that no payment is made without his knowledge, without his knowledge.
Finally, any necessary life insurance should always be taken out before the divorce is pronounced. If the paying spouse turns out uninsurable, the appropriate changes 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 can be considered marital property.
As with any problem that occurs during the divorce, figuring out how to handle insurance policy changes and coverage may not be as simple as it seems. It is important to know all existing divorce policies, as well as any new policies you may need as a result of the settlement. Because insurance can be a complex subject with many options, it can be helpful to use a licensed insurance professional or financial advisor to determine the best solutions.
To find out more, contact my colleague Beth Mayfieldand stay tuned for our next white paper on this topic.
