What Insurance Changes Do You Need to Address After a Divorce?

Divorce changes your life in many ways, right from the emotional aspects to the financial ones. While insurance is the last thing you want to worry about during this stressful time, there are some crucial adjustments you need to make when your marriage ends. Doing this now helps you protect against financial troubles later.

Here are the 4 main insurance types you need to update after a divorce:

1. Life Insurance

As part of your divorce agreement, you may need to purchase a life insurance plan (if you don’t have one already) and name your former spouse as the beneficiary. This ensures that the life insurance payout can be used in place of alimony or child support in case one ex-spouse dies.
If this is not a requirement according to the divorce agreement and you have no financial obligations (alimony, child support, etc.), you can remove your ex-spouse as the beneficiary from your insurance plan.

If you need to buy life insurance coverage as financial protection for your ex-spouse, look into term plans, which are affordable and flexible. You can choose the amount as well as period or term for which the coverage will remain in place (anywhere from 5 to 30 years).

2. Health Insurance

If it’s a policy in your own name, you can keep the existing coverage. If your ex-spouse has employer-sponsored health insurance and you’re listed as a dependent on it, that will change after the divorce is final.

In this case, you can buy a personal policy or sign up for your own employer-sponsored health plan if it’s offered (if you lose insurance from another source, you can sign up even after the regular open enrollment period has ended). Another solution is the Consolidated Omnibus Budget Reconciliation Act (COBRA), which lets you keep your ex-spouse’s health plan coverage and pay for it yourself.

According to this act, family members losing their group health insurance coverage after a life change may buy the existing coverage within 3 years. It applies to plans sponsored by employers with 20 or more employees, but similar laws are in place for companies with under 20 employees. Talk to your insurance provider about the cost and how to continue the coverage.

3. Disability Insurance

This is as important as your life insurance plan, since it replaces a portion of your earnings in case an illness or injury leaves you unable to work. Before the divorce is final, plan your disability coverage with your ex-spouse.

The chances of suffering a disability for 90 days or more are higher than the chances of a premature death before retirement. Over 25% of people aged 20 today will be disabled before they retire, so it’s crucial to take this risk into account.

If you’re an earning member of your family, disability insurance can help you meet your financial obligations to your ex-spouse or children. If you’re not working and your ex-spouse is, you may need to require them to buy disability coverage as part of the divorce agreement.

4. Home Insurance

The home insurance policy needs to be in the name of the homeowner after the divorce is final. If you and your ex-spouse are living separately before the divorce is final, let your home insurance provider know.

Invest in renter’s insurance (which provides liability coverage and protects your assets) if you’ve moved into an apartment in the meanwhile. This will help pay for repairs and medical expenses caused by accidents or damage while living there.

It can also cover other costs like having to live somewhere else while repairs take place (after a fire, natural disaster, etc.).

If you’re getting divorced, get in touch with an insurance expert to understand how best to protect yourself financially. At LifeCentra, we’re here to help you through life’s ups and downs, so contact us today!