by Sandy Voit, Tangible Solutions

Insurance matters can be daunting for us in the best of times. First, there are lots of different types of insurance – life, health, disability, auto, homeowners, renters, long-term care, etc. Most of us probably have health insurance through employment. (Maybe disability insurance, too.) Most people don’t even consider getting life insurance until after we have children. If you own a house, your lender requires you to have homeowners’ coverage. Washington State requires that you have auto insurance if you own a car. The others may be more dependent upon your needs and what you can afford.

During a divorce, most all of these insurance issues will change. The sections below will give you an idea of some of the issues and what you might want to consider going forward.

Health Insurance:  Each spouse’s health insurance situation should be included in the final divorce decree. If you have children, their insurance coverage should also be included. In addition to health insurance, you should determine who will be responsible for unreimbursed expenses, such as the deductible, co-pay, co-insurance, vitamins, over-the-counter items, orthodontia, access to alternative medicine, etc.

If your medical coverage was through your ex-spouse’s employer’s plan, you may qualify to continue your coverage for up to 36 months under COBRA. Assuming you qualify, coverage isn’t automatic. You must contact the employer within 60 days and complete the necessary paperwork. I will post a separate article on Divorce: Health Insurance & COBRA soon.

If you don’t qualify under COBRA, or perhaps it is too expensive for your budget or needs, consider a standard health insurance plan, or coverage under the Affordable Care Act, or perhaps a catastrophic (major medical) plan. You can contact the Washington State Insurance Commissioner’s Office (1-800-562-6900, or www.insurance.wa.gov) to identify insurers offering plans in Washington State. Other states have a comparable office.

Life Insurance:  Review your  existing policies – are they still needed? If so, do you want to change the beneficiaries? Always check with your attorney before changing beneficiaries in connection with your divorce. If you are financially responsible for your children, examine whether or not you may need more coverage. If you are relying on your ex-spouse for financial support, consider purchasing additional coverage on your ex-spouse, naming you the beneficiary, so that if your ex-spouse dies you will still have a source of income. And consider becoming a co-owner of the policy so that if your ex misses paying the premium you will be notified and can pay to keep it in force. Even if you are the spouse providing support, should you or your spouse die, will you be able to afford to replace all that your spouse provided? All of these issues should be addressed in your final decree.

Disability Insurance:  Should you become disabled and unable to work (or if your ex-spouse is providing you financial support and becomes disabled), a disability policy pays a monthly benefit (usually around 60% of your gross wages but not your bonuses, commissions, or other forms of compensation). This income is taxable if your employer pays the premium but tax-free if you pay at least a part of the premium. If you are relying on employment income for yourself, or your ex-spouse for maintenance and/or child support, a disability policy can be essential should an employment income source no longer be available due to disability. Disability insurance is only available for employment-based income. 

Homeowner’s / Renter’s Insurance:  These policies protect your residence and contents from damage and theft and provide liability protection should someone be injured on your property. During a separation or divorce, it is critical to know that the “Named Insured” (the name of the person listed on the policy who is in control of it) only covers you for liability if you are living on the premises. When one spouse moves out, s/he is no longer covered. (The same is true under your “umbrella” coverage – additional coverage.) Contact your insurance agent as soon as one spouse moves out to assure continued coverage. Failure to do so may void your coverage.

Consider purchasing Replacement Cost coverage (reimbursement for the cost to replace an item). Most policies offered provide Actual Cash Value – the original price minus the depreciation – reducing the amount the insurance company will pay for an item. They will pay the depreciated value or the market value, whichever is lowest.

To reduce the cost of your premium, you may want to consider increasing the amount of your deductible. 

Auto Insurance:  This policy covers damage and theft to your vehicle, as well as the damage your vehicle causes to others. 

Often when a couple has separated, you only need to notify your auto insurance agent in order to change your coverage. You don’t lose the multiple car discount, and in many cases the premium cost isn’t impacted by this. Sometimes the premium increases minimally, and occasionally even decreases minimally.

Separate policies may be required if both spouses are not living together. When you divorce you will need to remove your spouse from your policy. Review what your policy covers – as a single person you may now want to consider options like towing, roadside assistance, rental reimbursement, etc. as you won’t have your ex-spouse (and their car) to rely on should something happen to your car.

Long-Term Care Insurance:  At some point you may need in-home care, assisted living support, and/or skilled nursing care. Do you have sufficient assets to assure that you will have a choice in the level of care you need/want? If you are married your spouse would likely provide assistance. When you’re divorced that is not likely, and LTC insurance can help provide needed assistance without depleting your assets. Purchasing it while you’re healthy and young enough helps you obtain desired coverage at lower premiums.