Divorce can be very stressful. Divorce lawyers can ransack your assets and bank accounts, and you might even need to move out form your own home. But, what happens to your insurance coverage after separation? Married couples usually buy joint policies. After the divorce, divorcees need to negotiate new deals with insurance companies in order to keep themselves covered. In this article we explain how divorce affects different types of insurance.
If you’re a joint policy holder, you should notify your spouse and take their car off your policy. If your spouse is a policy holder and they take your car off their policy, you’ll need to buy another individual policy in order to extend your auto insurance coverage. It’s always better to purchase your new policy at the same insurance company, because only then you’ll be able to keep your old benefits and discounts. If you have kids, you should keep them on a parent’s policy until they turn 18, because separate insurance for underage drivers can be very expensive.
A homeowners’ insurance policy protects your home and your belongings from fire, theft, vandalism and natural disasters. If you were able to keep your home after the divorce, you’ll need to contact your insurance company, so they can adjust your homeowner’s coverage. If you are the spouse who’s moving out, you’ll need to set a new renter’s or homeowner’s insurance for your new place.
Most divorcees who listed their spouse as a beneficiary want to change that after the divorce. If you have kids and you pay for their alimony, deleting the spouse from your policy might also affect your children in case you die. That’s why most insurance sellers advise recent divorcees to keep their child-caring spouse as one of the beneficiaries. Keeping your current life insurance also allows you to lock your rates and insurability.
Naming your children as beneficiaries is also an option, but you should have in mind that minors under the age of 18 can’t directly receive insurance benefits. In case you die, insurance money will be managed by a court trustee, or the insurance company will hold it until your children turn 18. Some people also decide to establish a trust and list it as a beneficiary. In the trust they can name a relative or a family member who will be in charge of handling their children’s financial issues.
In Community Property states, a life insurance fund is often viewed as a community property. Filing for uncontested divorce in California is usually followed by the division of life insurance benefits, where each spouse gets an equal share of the funds.
If you’ve been a part of your ex-spouse’s family health insurance plan, you’ll need to find new health insurance after the divorce process ends. Before you do that, you should check whether you can qualify for COBRA, which allows divorcing spouses to keep their current health insurance at their own expense for another 36 months.
COBRA comes with both advantages and disadvantages. It’s a relatively cheap and hassle-free way to ensure your health insurance coverage for another 36 months. On the other hand, if you develop a condition which reduces your insurability during your COBRA coverage, you might need to pay much higher health insurance rates in the future.
Divorce is definitely the worst time to think about insurance, but it can be very risky to leave yourself and your children without regular insurance coverage during this stressful period. That’s why you should schedule negotiations with your insurance agent right after you sign your divorce papers.