Going through a divorce can be an agonizing process that impacts your finances, emotional well-being and physical health. It’s with good reason that divorce is listed second only to the death of a spouse on the Holmes - Rahe Stress Life Inventory, an index of common life interruptions with a corresponding “social readjustment rating.” Depending on individual circumstances, there are often child custody, property and other issues that a divorcing couple must address and resolve. In addition to the personal and financial complications that can result from ending a marriage, severing a legal relationship also means contending with changes to insurance needs.
When determining insurance needs after a divorce, you’ll want to focus on five areas: health insurance, homeowners/renters insurance, auto insurance, life insurance and disability insurance.
You may have received health coverage through your spouse's workplace, making it important to find out whether it ends after the legal relationship does. The odds are likely you’ll need your own insurance policy.
However, the Consolidated Omnibus Budget Reconciliation Act (COBRA) says qualifying ex-spouses can generally apply for continued coverage through a former mate's work plan if the employer has 20 or more employees. You must notify the health plan administrator within 60 days of becoming divorced in order to be eligible, but coverage will end after 36 months. Thus COBRA should be considered a temporary solution for the recently divorced. Children will still be eligible for coverage under the plan, regardless of parental marriage status.
New insurance exchanges, and policies offered directly by carriers, are other options. Since you can't be turned down for coverage, and pre-existing conditions won’t be excluded under health care reform, it’s in your interest to find out if these new choices cost less than COBRA.
Divorce often means one or both parties moving to a new home, making it essential to change the type and amount of homeowners or renters insurance you have depending on your new circumstances. Since personal possessions, such as furniture, electronics, etc., will likely be divided between homes, it's important to keep your insurance company informed of the changes. If special floaters or endorsements have been taken out to protect luxury items, you should cancel these if you no longer have possession of them. Taking a detailed inventory after possessions have been divvied up will help homeowners and renters determine their needs.
Insurance carriers should be contacted immediately regarding change of ownership for any vehicles previously owned as a couple. You should obtain a new, separate auto policy for yourself and any automobiles for which you have custody. If you’re keeping your current policy but removing your former spouse from it, do so as quickly as possible to protect yourself from any liability issues that may arise from an accident.
Since most couples list their spouse as the primary beneficiary on life insurance policies, it follows that this designation may need to be changed after divorce. That said, this may not always be feasible. If you are still responsible for alimony or child support, leaving your former spouse as the primary beneficiary makes sense. However, if children are not part of the equation, changing the beneficiary on a life insurance policy is probably best.
Much like life insurance, disability insurance can act as protection against ongoing costs underwritten by former spouses, such as alimony or child support. According to the III, a person between the ages of 25 and 55 is more than twice as likely to become disabled as they are to die. Unexpected illness or injury can lead to loss of income, and put your children at an economic disadvantage. It may be a good idea to invest in disability insurance to make certain your kids are taken care of, should you become unable to work.
If you are one of the almost 50 percent of married couples who end in divorce, you are not alone. It can be a frightening, sad and emotional experience that will require much support to overcome. While your HUB broker can’t resolve everything, we can help with each of these insurance considerations, ensuring that adequate coverage will make a stressful time a little less worrisome. Learn more about your coverage options or get in touch with an advisor.