Divorce is generally not considered a pleasant thing by many people, but just in death and estate planning, insurance changes relating to divorce may be something divorcees would consider in their settlements or post-divorce lives. Although in some cases it may be impossible and emotionally not worthwhile to be financially pragmatic, though it could be of benefit to both parties to give some thought to insurance related concerns.
Depending on the type of policy, changes incurred from divorce may be drastic or minimal. Issues such as divorce settlement terms, judicial decree, federal regulations, family and individual needs can all affect coverage after the divorce. For individuals who are soon to be, or recently divorced there may be several issues to consider before proceeding with changes to insurance policies. This article will first outline some of those concerns and then discuss how and what changes may occur.
Some of the matters that divorcees might want to consider in terms of their insurance coverage are the following factors:
• Spouse’s employer provided insurance, if any and regulations pertaining to that.
• How soon do you want to separate all financial aspects of the relationship.
• What will be increases in rates due to reductions in a multi-car and/or multi line policy.
• If existing policies can be simply adjusted do you want to use the same agent as your ex.
• The benefits of retaining existing policies can be cost effective.
• Identification of insurance priorities such as children, auto, health etc.
Once a decision is made either by court decree or mutual consent via annulment of marriage, the process of changing insurance policies can begin. Depending on what the court decides it could mean anything from surrendering life insurance policies to allowing mutual collaboration. In other words, the decision to change insurance shouldn’t really be made until the divorce is final.
Different insurance policies have different regulations and requirements associated with divorce decrees and settlements. Life insurance settlements can be more complicated than automobile insurance due to the fact beneficiaries, and retirement income may be involved in addition to changes that may not fall within the original contract terms. Speaking with a life insurance agent, reading the contract and researching regulatory laws can assist one in knowing what one has a right to thereby empowering both parties in the divorce to keep as many benefits and advantages of the original policy as possible.
In cases involving the dissolution of previous policies, one is charged with the task of finding new insurance and/or re-establishing contracts with previous insurance companies. The companies that offer the most flexible terms of service and agreement may be the best choice as such terms may include continuation of pre-existing terms as an individual despite the divorce.
Tips on keeping the most insurance benefits after a divorce
The following tips are intended for higher financial benefits and not necessarily emotional peace of mind but may be worth considering nonetheless:
• Maintenance of existing coverage
Change allows insurance companies to insert new caveats, reset interest rate terms, fee schedules etc. Keeping old policies alive avoids such changes.
• Consider Children’s Needs
Dissolving life insurance policies can mean less potential coverage for children in the event of illness or death of one or more of the parents. If children are a priority, consider the effects of the divorce settlement on their needs.
• Reassess Insurance Requirements
After divorce insurance needs may change, increasing deductibles, shedding insurance on things like your ex-spouse’s gold watch collection may be wise. If the benefits outweigh the costs, trimming insurance coverage might be a good idea.
• Collaborate for Financial Gain
Sometimes divorce involves complete emotional, psychological, physical and financial annulment of a relationship. If however, that is not the case, there may be advantages to keeping old policies intact for as long as legally possible. Those benefits can include family discounts, non-adjusted premiums, higher coverage values and less paperwork.
• Review applicable law
Depending on what type of coverage one had during the marriage, Federal laws may allow continuation of various policies such as Health insurance regardless of severance of relationship i.e. in the case of spousal coverage via an employer, coverage can continue unchanged up to 3 years in some cases. However, this may not suit or be applicable for every divorced couple. Insurance agents, divorce lawyers and insurance managers may be able to assist with the legal regulations. Nevertheless, it doesn’t hurt to double check to make sure they’re giving you the best deal.
In summary, divorce is likely to have some impact on insurance of one kind or another. Insurance that existed before the marriage may stay intact and untouchable as previously held property, however insurance such as life insurance acquired during the marriage are subject to settlement terms. There may be some flexibility concerning health insurance continuation, but the bottom line is keeping as much coverage with few if any disadvantageous changes to coverage, terms or cost.