If you are going through a divorce, it is unlikely that insurance coverage is at the front of your mind regarding concerns that you have heading into your case. That does not mean that health insurance isn’t essential, however. You or your spouse likely has health insurance coverage through your respective employers, which covers you and your spouse. If you have children, the same could be said. After the divorce, however, you may no longer be covered by your spouse’s insurance. For this reason, you need to be aware of the issues that relate to your divorce and health insurance coverage.
Health insurance will be an issue that is covered in your final decree of divorce.
Health insurance has become an increasingly important topic within our society. As a result, it has also become equally important as it pertains to divorce cases. Your final decree of divorce (the document that will complete your divorce case) may contain provisions that order you to maintain your ex-spouse as an insured on the health insurance plan that you have for yourself and your kids.
You see situations like this arise most frequently when an ex-spouse has not worked outside the house and is reliant on health insurance. If you have children who need health insurance coverage, you will undoubtedly be ordered to maintain that coverage. You and your ex-spouse would likely split the responsibility of paying for out-of-pocket and non-insurable charges.
Depending on the specific provisions for your health insurance plan, you may have to pay additional premiums or a high single premium for coverage after the divorce regarding your ex-spouse and your children. In some instances, you will be able to maintain coverage for these folks after the divorce. This is especially true for group plans and policies. Group family plans may cost less money than covering two adults with a single project.
Make sure that your children have health insurance coverage with no lapses.
Your children will need to be covered by health insurance from some source both during the divorce and in the years after the divorce until that child turns 18. Health insurance would either be provided by an employer-based health insurance policy, through a private policy bought by you or your spouse, or through a government plan like Medicaid. If the government plan is chosen, you or your ex-spouse would need to reimburse the state for this expenditure on behalf of your children.
Within the final decree of divorce itself, health insurance would fall under the heading of child support. You will need to the layout which is responsible for paying what when it comes to health insurance. I mention this because a judge will not sign a final decree of divorce until some provision exists.
When you may need life insurance based on various stages of your life
Life insurance is not for everyone. Instead, you would need to ask yourself this question to determine whether or not you need life insurance: were you to die, is there anyone else (spouse, children, etc.) that relies on your income for their livelihood, which would now be put in a situation where their well-being was in jeopardy. If you were single, had no children, and had a few thousand dollars in a savings account, then you likely wouldn’t need life insurance. However, if you are reading this blog post, I can safely assume that you are not in that sort of position, however.
Getting a divorce as a young adult
When you are in your late teens and early twenties, you are becoming more self-sufficient but still may have limited resources and limited funds in the bank. This is relevant if you die. Who would pay for a funeral, burial costs, and any other assorted expenses associated with your passing? You should do your best to ensure that you have an emergency fund for yourself while you are alive. If you were to pass away suddenly, this money could be used to fund a funeral.
Your passing as a young person may not create a hardship for your spouse if they also have an income. If you have a mortgage or are responsible for making payments on another real estate, then your spouse would be left in the wrong position if they could not continue to make those payments without the assistance of your income. In this circumstance, even though you are still young, buying life insurance would be a good idea.
If you are divorcing at a relatively young age and do not have children, your need for life insurance is minimal. The only exception to this will be if you are ordered to pay spousal maintenance or contractual alimony. If so, then your judge may request you to take out a life insurance policy to ensure that the money can be paid to your ex-spouse after you pass away.
Getting older means the need for life insurance likely increases.
Once you get a little older, your need for life insurance has likely increased. Now you have a mortgage, a child, and additional responsibilities that require financial expenditures that dwarf life in your early 20’s. This is doubly true if your spouse does not work and contributes nothing monetarily to your home. Your passing away could be a catastrophe for your family if you were the only source of income for your household.
Buying a house should mean that you and your spouse stayed on budget and figured out what you all could afford. However, my impression is that most young, married couples with children tend to overbuy rather than underbuy when it comes to the family home. Buying a house at the top of the family budget is one thing. It’s another when half (or more) of the family’s income is lost when one spouse passes away.
Amid illness and hardship, debts of other kinds are likely to arise. Credit cards can be an easy way to make sure medication is paid for and expenses associated with credit cards are quickly swept under the rug. All you have to do is make a measly minimum payment at some point before the end of the month, and you will be ok, right? When difficulties of life attack you, be sure that you are not spending with credit cards to cover up the pain you are experiencing.
I would recommend that any person going through a divorce who will also be receiving child support or spousal maintenance payments from an ex-spouse should request that a life insurance policy be taken out against their ex-spouse. You can have a little peace of mind knowing that if something terrible happens to your spouse, your primary source of income will not be gone forever.
The other factor that I will talk to clients about is whether or not it will become necessary for them to begin caring for an aging parent in the years following their divorce. If you have a sick or ailing parent you may become responsible for; you may need to go ahead and ask that your spouse take out an even more significant amount of life insurance.
What if you already have a life insurance policy through your employer
This is a question that I sometimes receive from clients- they have insurance provided by their employer, and they wonder whether or not an additional policy is necessary. The bottom line is that this policy will be canceled as soon as you leave the company. This will leave your family high and dry without a policy in place. You can do to prevent a scene like this from playing out is to apply for and take out another life insurance policy that can stay with you even after you leave your company.
The other thing that I have noticed in my time as a family law attorney is that the policies that people provide through their employers are not sufficient in terms of a payoff amount. A free $50,000 policy from work is not a bad thing, but it is insufficient as far as providing an income for your family moving forward. A good rule of thumb is to purchase life insurance that pays out at 10x your average annual income.
As your income and other life circumstances change, you must change your policy if necessary. Having coverage that is not up to date can be disastrous if an unforeseen death occurs. You do not want to go through all the trouble of having a life insurance plan but have its payout be insufficient for your purposes.
We have already walked through the circumstances of your life that can change in just a short period: a spouse, children, and a mortgage all change the game as far as life insurance is concerned. Any debts that you owe associated with an unincorporated business may fall to your estate to pay.
Life insurance in the years after a divorce
If you and your spouse decide to get a divorce, you have to decide what route you want to go as far as life insurance is concerned. Coverage and beneficiary issues arise when you get a divorce. Having children makes the analysis even more complex. However, if you and your spouse do not have children, then all you need to do is update your beneficiaries, and the insurance company knows you are single and no longer married.
If you have kids, you will want to make sure that they are provided for as beneficiaries under the policy. The thing that you do not want to have happened is your ex-spouse to collect under the policy. That’s not to say that your ex-spouse would squirrel away the money and not get it to your children, but it would create an unnecessarily complex set of steps for your ex-spouse to have to get your children the money that should have been theirs.
You may end up having to purchase a new life insurance plan if your spouse owns the existing project or change the beneficiary on the current plan from your spouse to your kids. A trust may have already been set up for your kids until they turn 18. The trust can be listed as a beneficiary that would be paid the benefits under the life insurance policy at the time of your death.
Handling issues related to life insurance for older divorcees
Life insurance probably is not necessary for you as a person getting a divorce in your golden years. The fewer people in the world who depend on your income for subsistence, the less likely you are to need life insurance. The other thing to keep in mind is that you (hopefully) have been saving and investing diligently throughout your life. This means that if you are not paying your ex-spouse any support and have no children under 18, the need for life insurance in connection with a divorce is zero. You can speak with your attorney more about this, but I do not see a need for it under these sorts of circumstances.
Questions about life insurance and divorce? Contact the Law Office of Bryan Fagan
If you have any questions about the information contained in today’s blog post article, please do not hesitate to contact the Law Office of Bryan Fagan. Our licensed family law attorneys offer free-of-charge consultations six days a week. These consultations are an excellent opportunity to learn more about our office and receive direct feedback from our attorneys about your specific circumstances. Thank you so much for being so interested in our office, and we hope that you will join us again tomorrow here on our blog.