Navigating the Important Aspects of Insurance Coverage in Divorce

For many, the decision to divorce is often one of life's most painful decisions. Often,

one’s emotional well-being is tested like never before; the fear of financial insecurity

sets in, as well as an overwhelming sense of untangling what was once your shared life

from your new single reality can become quite complex. It is critical during the divorce

process to review the adequacy and appropriateness of your current insurance

coverage.

After a divorce, it's essential to reassess your various types of insurance policies,

including life, health, disability, and property and casualty insurance. Reviewing the

coverage terms, limits, premium costs, and beneficiaries of these policies will help

ensure you are well-protected and that they align with your estate and charitable plans.

Embracing this change can lead to a more promising future.

Health Insurance Coverage

If your ex-spouse had provided you with health insurance, you may want to consider

finding a new plan either through your job or by exploring options available on the

Health Insurance Marketplace. Since you are no longer married, you can enroll in a new

plan during the special enrollment period 1 .

You can also explore COBRA (the Consolidated Omnibus Reconciliation Act,

https://www.dol.gov/general/topic/health-plans/cobra ), which allows you to continue

your health insurance coverage from your ex-spouse. Usually, you cannot stay on your

ex-spouse’s health insurance as a dependent after the divorce. However, COBRA

allows you to continue your coverage for up to 36 months. Remember, you will need to

pay the full premium, including the portion that your employer used to pay, along with

any applicable administrative fees.

Assess your and your dependents' health needs to determine the best health insurance

plan to fit your family’s needs. Consulting an insurance advisor can help you find a plan

that works without financial strain.

Auto and Home Insurance Policies

Updating the named insured party on your car policy is a crucial step. If you’re switching

titles on cars, please notify your insurer about the ownership transfer to ensure your

policy is updated correctly. After a divorce, it’s essential to avoid gaps in coverage. Also,

it may be a good time to review your premiums, coverage amounts, and deductibles.

It's essential to reassess your homeowners' insurance policy, especially if you transition

from owning to renting. The type of coverage you need may differ significantly.

Additionally, clarify with your ex-spouse any shared insurance responsibilities for jointly

owned properties, including vacation and rental properties you may still share.

Additionally, you may want to consider flood, hurricane, and other natural disaster

coverages and factor in the cost of these riders when determining who is responsible for

insuring each of your homes.

You may want to consider the need for an Umbrella policy. It is a type of personal

liability insurance that provides extra protection beyond the limits of your standard

insurance policies, such as home, auto, or renters insurance. It can help protect your

personal finances, cover new liability risks, and safeguard your children and

assets.

Adapting Life Insurance to Fit New Circumstances

As you start your separate lives, it’s essential to take a fresh look at your life insurance.

The changes in your financial situation need to be accurately reflected in your coverage

limits, named policy beneficiaries, and the amount of coverage, among other things.

Ensure that your beneficiaries are up to date and accurately reflect your goals and

financial obligations. After a divorce, don’t wait to update your beneficiaries to reflect

your new situation. Depending on your divorce agreement, you may need to remove

your ex-spouse as a beneficiary and consider adding your children, a trusted family

member, or a trust that supports your kids' future as beneficiaries. Your settlement

agreement may spell out who needs to be listed.

Next, reevaluate your life insurance coverage amount. The needs of a single parent

may require more coverage to support their children’s futures, such as college

expenses, paying off a house, or helping with a first home purchase or starting a

business. Conversely, if you find that you have too much coverage now, you may want

to adjust it to fit your current financial situation better.

If you have jointly owned policies or ones related to your divorce, it adds more

complexity. You will most likely need to revisit who pays the premiums, who is the

insured, and who is the owner and beneficiary of the policy. Understanding these

shared financial responsibilities can help you manage your life insurance effectively and

prevent unforeseen financial costs in the future.

Consult legal, insurance, and/or financial advisors to review your insurance policies to

ensure you meet your legal and risk management needs. Wise professional advice can

benefit you and your family today and in the future. Navigating the new divorce “waters”

is complex, expensive, and stressful - that’s why I strongly recommend hiring trusted

and experienced advisors to help you achieve your goals.

For more information or to arrange a consultation, please get in touch with Jason Cole

at Full Court Strategic Wealth.

The Second Act Money Guide Blog appears once a month. If you have questions or

need advice, please contact Jason Cole at Full Court Strategic Wealth at 267.970.6464

or jcole@fullcourtstrategicwealth.com.