If you are going through a divorce its unlikely that insurance coverage is at the front of your mind as far as concerns that you have heading into your case. That does not mean that health insurance isn’t important, however. It’s likely that either you or your spouse have 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, it is entirely possible that 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 the health insurance from you. In the event that you have children who need health insurance coverage almost certainly you will be ordered to maintain that coverage. Your ex-spouse and you 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 an increased single premium for coverage after the divorce regarding your ex-spouse and/or 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 plan.
Making 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 then 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 clearly lay out who is responsible for paying what when it comes to health insurance. The reason I mention this is that 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. Rather, 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 who would now be put ina 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 then 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 in the event that 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 make sure that you have an emergency fund for yourself while you are alive. If you were to suddenly pass away, this money could be used to fund a funeral.
Your passing as a young person may not create a hardship for your spouse if he or she also has an income. If you have a mortgage or are responsible for making payments on other real estate then your spouse would be left in a bad position if he or she were not able to 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 then your need for life insurance is minimal. The only exception to this would be if you are ordered to pay spousal maintenance or contractual alimony. If so, then your judge may order 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 under buy 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.
In the midst of 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 easily 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 in order to cover up the pain that 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 in the event of something bad happening to your spouse, your main 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. In the event that 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 greater amount of life insurance.
What if you already have a life insurance policy through your employer
This is a question that I receive sometimes 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 cancelled as soon as you leave the company. This will leave your family high and dry without a policy in place. What 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 are provided through their employers are not sufficient enough 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 being able to provide 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 it is necessary for you to change your policy if necessary. Having coverage that is not up to date can be disastrous in the event that 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 of time: 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
In the event that you and your spouse decide to get a divorce then 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 know you are single and no longer married.
If you do have kids, then 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 happen 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 difficult 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 plan or to simply change the beneficiary on the existing 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 who is 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 over the course of your life. This means that if you are not paying your ex-spouse any sort of support and have no children under 18, the need for life insurance in connection with a divorce is basically zero. You can speak with your attorney more about this but I do not see a need for it under these sort 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 a great opportunity to learn more about our office and to receive direct feedback from our attorneys about your specific circumstances. Thank you for your interest in our office and we hope that you will join us again tomorrow here on our blog.