Going through a divorce can be difficult, and it’s important to understand your options when it comes to insurance coverage.
For all of your insurance policies, it’s a good idea for the party receiving financial support to pay the premiums to ensure that each policy remains in force and that the beneficiaries are not changed. Also, make sure the cost of the premiums is included in the divorce settlement.
Here are some other things to think about when it comes to managing your insurance policies after a divorce.
Health insurance
If you and your spouse each have your own health insurance policy and you don’t have children, then insurance shouldn’t be an issue if you get a divorce — each of you would remain on your current insurance policy. However, if you’re both on one policy, and you have children who are also on that policy, things can get a bit complicated. Here are some things to consider:
- If one spouse is dependent on the other for health insurance sponsored by an employer, the dependent spouse may be eligible for COBRA coverage after the divorce. The COBRA coverage could last up to 18 months. The divorce decree should state who will pay the premiums.1
- The divorce decree should also state a plan for how insurance will be provided after COBRA coverage ends.1
- COBRA only applies to employers with over 20 employees. So if the couple’s health insurance is sponsored by a small practice with fewer than 20 employees, the dependent spouse may not be eligible for COBRA. However, the dependent spouse may be able to obtain a court order known as a Qualified Medical Child Support Order requiring the former spouse’s insurer to continue covering the children.2
Although not required by law, some association-group plans allow an insured’s ex-spouse to remain on the existing health insurance plan for a short amount of time after the divorce. Check with your plan’s administrator to find out if your plan has this feature.
Life insurance
If you and your spouse get divorced before having any children, you may not want or need a life insurance policy at all. However, if you have children and you and your former spouse are raising them together, you may want to consider some of the following factors:
- If the former spouse who is providing alimony and child support dies, this loss of income could negatively affect the dependent spouse and children.
- If the former spouse who bears the primary responsibility for raising the children dies, costly childcare will need to be arranged.
For these reasons and others related to the financial support of your children, you and your former spouse may want to keep each other as beneficiaries on each other’s life insurance policies.
Long-term disability insurance
As with life insurance, you and your former spouse may want to continue carrying LTD insurance if you have children, so you can continue to provide for them if either of you experience a long-term illness or injury. The funds for this insurance should be represented in the amount of financial support the spouse and children receive.
1. Insurance Information Institute website, Life Stages / Divorce page at www.iii.org/services/life_stages/divorced.htm.
2. United States Department of Labor website, Employee Benefits Security Administration, Qualified Medical Child Support Orders page at http://www.dol.gov/ebsa/publications/qmcso.html. Accessed April 6, 2010.
