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Divorced or Separated? How to make sure you have continuous insurance coverage

Risk management is an important part of building wealth and staying healthy. As your life changes, so does your risk profile and what you need to be protected. With all of the emotions we encountered this year and an increased proximity to our family that can cause stress and relationship issues in the home. If you are divorced or separated, now is thetime to adjust your coverage and make sure there are not any gaps. There are several areas to look at to ensure you manage your risk. With all insurance needs make sure you and your dependents are properly covered between the various policies.

 Health insurance usually comes with employment and nonworking spouses will be at risk in a divorce, since they will no longer be considered dependents covered under the employed spouse’s group insurance. If you work and your employer offers health insurance, the divorce is considered a qualifying event, and you can switch to your employer’s coverage without waiting for an open enrollment period. Call the insurance carrier for your spouse’s policy and request a certificate of insurance. This proves that you were insured until the qualifying event, so you can’t be excluded or charged a higher premium for pre-existing conditions.

 If you are not employed, the same qualifying event definition makes you eligible for coverage under COBRA, a federal law that allows you to continue the coverage for a certain time period under specific conditions. COBRA is short-term expensive option because you pay the full premium yourself. You can purchase individual health insurance policies. There are a variety of options and take the time to consider what is needed for your situation and if there are state programs to help pay for coverage.

 Your homeowners insurance covers your house and its contents. If you decide to move to an apartment, you no longer need to insure the apartment building, but can purchase renter’s insurance to cover your possessions. For jewelry and other high valuables, such as antiques and collectibles, purchase riders to cover them the default coverage limit is not enough. If you have a young driver that drives vehicles owned by each spouse, you will want to contact your insurance agent to determine which policy they should be added to. Depending on the legal language of the insurance companies and driving situation the young driver may need to be added to both policies.

 Homeowner and auto insurance also include liability coverage in the event of a lawsuit. The more assets accumulated the higher risk you are of a lawsuit. Both spouses’ need to make sure they have coverage to protect their assets. See an earlier post on umbrella policies and when they are helpful. 

Most couples name each other as beneficiaries on their life insurance policies. You will want to review your beneficiary designations on all policies and also discuss your decision with the trustee of your will or trust. A good approach is to coordinate with your former spouse on what an adequate amount is needed to leave behind for your loved ones or those you want to support. This is especially important for families with children to make sure there is at least some financial stability if a tragedy does occur.

 With two incomes, you have something of a safety net if you are unable to work because of a short- or long-term disability. Going it alone, you may want to consider disability coverage either through your employer or privately, especially if you have no emergency reserve funds or other income to fall back on. Not being able to earn income for an extended amount of time could materially impact your financial situation that you cannot easily fix.

 Risks play as important a part in forming your financial picture as do your assets and liabilities. It can be difficult to understand insurance products coverage limits, deductibles, exclusions, etc. especially while going through changes quickly.  At Welch Financial Planning, we are educated in all of these areas and can help you determine what is needed for you now and then adjust it as you need to.

 To your financial success!

 Brad Christian