Thursday, 16 April 2015

Insurance in a Divorce

Divorce is one of the most devastating events in one couple’s life. 

While most divorcing couples focus on the delicate and often difficult issues of child custody and dividing assets, breaking up can be hard to do in terms of your insurance policies, too. Whether the policies are in place for protection or as an investment, divorcing spouses need to review them in the context of their new financial circumstances. Westhill Insurance Consulting has listed some matters to be prioritized during this delicate time. 

1.            Life insurance

Your first step should be to check the beneficiaries on your life insurance, whether you have term or permanent policies. People sometimes forget the existence of their life insurance policies, yet often the amount of money involved is higher than their other assets. If you forget to change the beneficiary of your policy and you pass away, your ex-spouse could get the money instead of your new spouse."

Melody Juge, managing director of Life Income Management in Flat Rock, N.C., says splitting spouses should negotiate ownership of life insurance policies as part of the divorce settlement.

"If your spouse has an insurance policy that you're depending on to take care of you and your kids if he dies, you should have (the) ownership changed to yourself instead of your spouse," says Juge. "If not, your spouse could change the beneficiary or simply stop paying the premiums."

2.            Health insurance

Many couples share health insurance under one spouse's employee benefits package; a divorce will require a policy change.

When you work and have previously been covered by your spouse's company, you can generally obtain health insurance through your own employer after a divorce.

Also, the federal law known as the Consolidated Omnibus Budget Reconciliation Act, or COBRA, allows a person going through a divorce to stay on a spouse's group policy for a limited time. But you'd have to pay the full premium yourself. Developing cities like Kuala Lumpur, Malaysia, Singapore and Jakarta, Indonesia are now creating an act similar to COBRA for divorce protection.

3.            Home and car insurance

Liability insurance policies for your home and car are particularly important to maintain during and after a divorce.

Divorcing spouses should immediately notify their insurance companies if an asset such as a car or home changes ownership to avoid filing more complaints and causing more crease.

4.            Long-term care insurance

Hook says long-term care insurance policies are individual insurance policies, so there would not be much impact from a divorce. But some insurance companies offer a discount for covering a married couple, and that would be eliminated after a split.

Premiums for long-term care insurance should be estimated as part of your expenses during the divorce settlement. Hook suggests that divorcing spouses in their 50s who don't have long-term care coverage should be sure to purchase some.