Divorce involves more than the division of property and parenting time. It often requires rethinking of an individual’s insurance coverage as well. From health and life insurance to car and homeowners’ policies, separating spouses generally need to review their current coverage and plan for new, individual needs moving forward.
If you and your spouse are going your separate ways, you may be feeling so overwhelmed that the idea of reworking your insurance coverage seems impossible. Yet, it is a task that is potentially well worth your effort. Thinking carefully about insurance during divorce can help prevent gaps in coverage and help you to avoid unnecessary financial risk.
Your future self may thank you for focusing on these concerns
Health insurance is often the first concern that couples tackle after deciding to divorce. If one spouse is covered under the other’s employer-provided plan, that coverage typically ends once the divorce is finalized. This means the spouse losing coverage will need to find an alternative, whether through an employer, the Health Insurance Marketplace or COBRA.
Life insurance is another important consideration, especially when children are involved. Life insurance is often used to secure child support or spousal support obligations. Courts may require a paying spouse to maintain a policy naming the receiving spouse or child as beneficiary, to protect the family’s financial stability in the event of the paying parent’s death.
Homeowners’ and renters’ insurance should also be reviewed. If one spouse remains in the marital home, they will likely need to update the policy to reflect sole ownership or tenancy. The other spouse will need a new policy for their new residence. It’s also important to update personal property coverage to match individual needs and belongings after separating households.
Auto insurance can present similar issues. Joint policies should be separated, with each spouse obtaining their own coverage that reflects their current vehicle and address. Removing a former spouse from a policy and notifying the insurer of any changes in ownership or usage is necessary to avoid complications or liability concerns.
Lastly, don’t forget about umbrella policies, disability insurance or any supplemental coverage that may be in place. All of these policies should be evaluated in light of the new legal and financial circumstances post-divorce. Why? Because life happens. And when it does, you need to be prepared.