- How divorce affects insurance
- June 15, 2015
If you and your spouse divorce, it is imperative that you discuss what to do about your life insurance policy or policies. Discuss your options prior to filling for divorce to see how your life insurance can continue to protect your beneficiaries.
People are so concentrated on the tough issues – such as child custody, support and dividing assets – that many forget about life insurance. If your spouse has an insurance policy that you are depending on to take care of you and your children, and he or she dies, you need to be the owner of that policy. If you do not take ownership, your spouse could re-marry and change the beneficiary information to someone else. This is what should be discussed in your divorce settlement with a financial adviser that can look at the full picture.
New life insurance may need to be established so that each spouse can determine how it should be used if they pass away, especially if you have children. If you cannot decide on how to best handle policies, many times the courts will help to make a decision for you.
Some agreements require the non-custodial parent to pay for a policy on his or her life and to name the custodial parent as beneficiary. Your agreement should also state that you periodically receive proof that the policy is still in force.
If a court has ordered, for instance, that you must continue an existing policy with your former spouse as beneficiary, you cannot change it or stop making payments if required by law.
If one spouse participates in a group health insurance plan at work that provides coverage for both spouses, you need to decide during the divorce settlement if continuation of coverage is required. Temporary protection can be provided under Consolidated Omnibus Budget Reconciliation Act (COBRA). Different states provide more options than just COBRA.
Property and Car Insurance
According to Bankrate, liability insurance policies for your home and car are particularly important to maintain during and after a divorce. Even if moving out, home coverage, especially liability, should be in place.
If your spouse decides to eliminate liability coverage but your name is still on the deed, then you are still liable if anything happens to anyone on the property. Divorcing spouses should notify their insurance companies if an asset, such as a car or home, changes ownership. You may lose discounts for bundling your car and home insurance with one company, insuring multiple cars and even just for being married when going through a divorce and separating assets.
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