Insurance – Understanding the Basics – Part 1

Understanding the basics of various insurance policies is important when going through the divorce process. As you have probably had joint policies on everything with your spouse, after the divorce, new insurance will almost certainly be required. So here is some information about the basic types of policies you should understand.

Auto: This insurance covers damage and theft to your vehicle, as well as the damage you or your vehicle causes to others persons or property. After your divorce is final, you will need separate policies. Discuss your options with your agent as you will need to remove your spouse from your policy. Also, consider what your policy covers – as a single person you may want to options like roadside assistance, towing, rental reimbursement, or other optional coverages as you won’t have your ex-spouse to rely on should something happen.

Health: This is a biggy to understand. Each spouse’s health insurance situation should be considered in both timing and financial needs of the parties after the divorce. If you have children, their insurance coverage must be addressed in the documents. Additionally, you must determine who will be responsible for unreimbursed expenses like deductibles, co-pays, over-the-counter items, orthodonture care, etc. If your medical coverage was through your spouse’s employer’s plan, you may qualify to continue coverage for up to 36 months under COBRA (Consolidated Omnibus Budget Reconciliation Act). Assuming you qualify, coverage isn’t automatic. You must contact the employer within 60 days and complete the necessary paperwork, and pay the new premium for coverage.

Life Insurance: Review your existing policies – are they still needed? If so, do you want to change the beneficiary(ies)? (Check with your attorney before changing). 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. 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 something happen and you become disabled and unable to work, a disability policy pays a monthly benefit. If you are relying on employment income for yourself, or your ex-spouse for maintenance and/or child support, a disability policy can be used to replace the employment income source if no longer able to work.