Insurance, Separation And Divorce: What You Need To Know
Ending a marriage is never an easy task. Stressful, painful and exhausting, the processes of separation and divorce forces people to address life topics on their own that once were shared with their partners. Among the most perilous of these transitional subjects is that of insurance. Whether auto, health or life insurance, the dissolution of a relationship can have a significant effect on one's coverage and status.
Some believe a separation is a less complicated process and not subject to the endless hurdles inherent in a full divorce. While a separation is less trying than a divorce, it can also lead to lots of paperwork and headache when it comes to insurance. Something to keep in mind is that on a joint policy, neither person can be removed without the express written permission of the other party. This also applies to any prospective changes to a joint policy.
Other important points to remember regarding separation and insurance is that once one of you does move, you'll want to update information on your auto insurance policy. Update addresses for each vehicle and note any differentiation in travel times to and from work. Once divorce is finalized and separate auto insurance policies have been established, make sure any children of age are on both policies if they use their parents' car. Should the child have their own car, ensure the car is registered and insured to the address and parent of the home the child stays at most frequently.
Anxiety over health Insurance coverage can be a major source of anxiety during a separation or divorce. With healthcare legislation remaining a hot button topic issue in Washington, D.C, some couples have opted to delay or even forego divorce proceedings. Once divorce proceedings are finalized, employee-based health insurance plans seldom continue to cover the former spouse of the employee. This can be particularly frightening for people with pre-existing, and/or life-threatening health issues. Thanks to the federal Consolidated Omnibus Budget Reconciliation Act or COBRA, you can keep the coverage of an ex-spouse for up to 36 months but must pay for it yourself. After three years, you're on your own. The law applies to federal and state government as well as private companies with 20 or more employees. While children of age will continue to be covered, once separate insurance is acquired for the non-employee spouse the kids should be included on the new plan as well.
Life insurance is usually part of any divorce settlement and if you currently have a coverage plan in place you might want to go ahead and keep it as is, even after the divorce is finalized. Life insurance payments are often factored into child support and alimony. Additionally, removing an ex from your plan as beneficiary might subject your children to substantial financial distress in the event of your demise. While naming your children as beneficiaries might seem like the answer, but children under 18 cannot directly receive life insurance benefits. Should you die without a legal trustee being named, the insurance company would hold the benefit until the oldest child turns 18. A more prudent solution would be to establish a trust through legal representation. This allows you to designate a friend or family member to act as a proxy in all financial issues regarding your children, or as their legal guardian or both. If you receive alimony, you might consider a clause to the settlement that dictates that coverage cannot lapse or beneficiaries be changes without your consent. Maintaining your life insurance will also serve to lock in your rates regardless of any future health issues. This is also among the many good reasons to purchase life insurance if you haven't already.
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