Divorce and Insurance
Because we often forget about insurance until we need it, life, health, homeowners
and disability coverage issues can get overlooked during a divorce settlement.


In working through your divorce, don’t forget your most valuable assets: your life and your health. Both
directly affect your ability to earn income and to care and provide for yourself and your family. You have
several areas to look at to ensure you’ve managed your risks.

Most couples name each other as beneficiaries on their
life insurance policies. At a minimum you will
need to change your
beneficiary designations on all policies, regardless of size. You may need to adjust
the amount of coverage, particularly if you were the nonworking spouse and you now plan to work to
support yourself and your family. Factors to consider include replacing your income,
paying off debt and
leaving enough to care for your family if you die.

Health insurance usually comes with employment, and again, nonworking spouses will be most at risk in
a divorce, since they will no longer be considered dependents covered under the employed spouse’s
group insurance. If you work and your employer offers
health insurance, the divorce is considered a
qualifying event, and you can switch to your employer’s coverage without waiting for an open enrollment
period. Call the insurance carrier for your spouse’s policy and request a certificate of insurance. This
proves that you were insured until the qualifying event, so you can’t be excluded or charged a higher
premium for pre-existing conditions.

If you are not employed, the same qualifying event definition makes you eligible for coverage under
COBRA, a federal that allows you to continue the coverage for a certain time period under specific
conditions. COBRA can be an expensive option, because you pay the full premium yourself, and is
temporary at best. Certain professional groups and other associations also offer group insurance for
which you may be eligible. You can also purchase individual health insurance privately, although the rates
are typically much higher than a group policy with comparable benefits.

Each year, 12 percent of adult Americans suffer a long-term disability. For every seven employed
Americans, one will have a period of disability five years or longer before age 65. A 35-year-old has a 50
percent chance of a disability lasting longer than three months before age 65. With two incomes, you
have something of a safety net if you are unable to work because of a short- or long-term disability.
Going it alone, you may want to consider
disability coverage either through your employer or privately,
especially if you have no emergency reserve funds or other income to fall back on.

Your homeowners insurance covers your house and its contents. If you decide to move to an apartment,
you may need renter’s insurance to cover your possessions. Check limits for jewelry and other high
valuables, such as antiques and collectibles, and purchase riders to cover them if necessary.

Risks play as important a part in forming your financial picture as do your assets and liabilities. With all
the products and carriers in the market, the choices can be overwhelming. A financial or insurance
professional can help you weigh your options and determine the best course of action during and after
your divorce.
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