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Changing Lives, Changing Needs: Divorce and Your Insurance


You may now be asking how the divorce will affect your insurance choices such as life insurance and health insurance. You are right to be questioning this. Substantial life changes such as divorce bring about the need to reassess one's finances and insurance should be an important part of that financial reassessment.

To start organizing your divorce insurance reassessment you will first want to get a blank sheet of paper and make a four column list with each of the points below as headings:

1. Review all policies currently in place during the marriage.

2. Decide which policies you will still need.

3. Decide how each family member's health insurance will be provided for.

4. Determine what additional insurance coverages would be needed or desired in the absence of a spouse.

Now that you have your headings, use the reassessment suggestions below to fill in each above heading with what you will need to add or change to complete your divorce insurance reassessment:

Health Insurance:

It is important as mature adults to make sure everyone still has health insurance after the divorce. Don't just worry about yourself and your children. Regardless of the divorce situation, it is in your best interest that your spouse has adequate health insurance since they will be a large part of your children’s well being and financial future.

If you don't have a health insurance plan of your own at work, you may be able to continue coverage through COBRA if your spouse carried health insurance for you. If that is not an option, consider an emergency health insurance policy with a large deductible or a short-term health insurance policy. Whatever you choose, try not to have a gap in your health insurance as this can cause problems if you acquire a medical condition that later may be classified as a pre-existing condition and will possibly not be covered.

Make sure it is clear who will be the primary provider for the children's health insurance. If both parents carry insurance through their employers, determine who will be the primary carrier and the other parent can be the secondary carrier. The secondary carrier will help pay any additional costs not covered by the primary carrier. It is common for insurance companies to follow the "birthday rule." Under the birthday rule the parent whose birthday comes first in the year will carry the primary insurance plan for the children. This birthday rule is not a law so if the outcome is not what is desired you may be able to make the choice yourselves.

Homeowners and Renter's Insurance:

If you plan to stay in the same residence after the divorce you will need to change the homeowners insurance to your name. You will also want to review your coverages. Check to see if you have an actual cash value or replacement cost coverage for your contents. ACV will give you what your contents are worth today while Replacement Cost will give you what it would cost to replace the item today. Now that you are a single parent it may be worth the small additional monthly amount to have replacement cost coverage.

In addition, check to see what the deductible is. A low deductible will give you a higher premium while a large deductible will save you money on your policy. Depending on your new situation a lower deductible verses a cheaper premium may have different benefits for each individual. The same goes with renter's insurance. It is important if you are now going to be a renter you insure your personal property.

Auto Insurance:

You will need to change your auto insurance policy to remove your spouse. This may alter your premium. Check with your insurance agent to see what other options you may want to add to your policy now that you are single. Adding towing, rental reimbursement, and emergency roadside assistance may be a benefit to some single persons.

Life Insurance:

Review the beneficiary details of your life insurance and you may want to consider increasing your life insurance coverage if you are the primary support system for your children. If you currently do not carry a life insurance policy now is the time to consider one. Term life insurance is a good option to carry until your children are out of college and it is more cost efficient than whole life policies.

Additional Coverages to Consider:

Additional coverages to consider are long term care insurance and umbrella insurance. Also, when reviewing your divorce insurance reassessment needs with your insurance agent you may also want to consider an annuity to help with retirement funds in the future.

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