Division of insurance during divorce presents challenging issues
Dividing property during a divorce is challenging. One of the most difficult aspects of divorce involves division of insurance.
Spouses often worry about losing insurance coverage — primarily health insurance — during a divorce. A professor of family medicine reports that he even has patients who remain in unhappy marriages out of fear of losing their health insurance coverage.
Losing insurance coverage frequently results in additional post-divorce financial difficulties, as well as deteriorating health. Individuals often stop going to the doctor’s office because they can no longer afford medical treatments without insurance. That is why allocating insurance coverage is especially important during a divorce, particularly when minor children are involved.
Health insurance considerations during a divorce
Certain types of insurance are easier to split than others. Health insurance is generally easy to split since one parent is typically responsible for providing all of the coverage to minor children.
This responsibility normally falls to the parent providing health insurance in the past. Additionally, couples usually make this decision based on whoever is currently covered by more comprehensive health insurance coverage.
Parents traditionally shared medical costs outside of those covered by health insurance. However, today these costs are normally apportioned based on income. The parent with the higher income normally ends up paying a larger portion of the cost.
If one parent moves out of state, it is important to determine if the insurance company writes out-of-state policies. If not, returning to court to re-negotiate health insurance coverage may be necessary.
Impact of divorce on other types of insurance
Determining obligations for other types of insurance is more difficult. Responsibility for car insurance coverage is decided solely by the parents. A court cannot decide that a child should have a car or that one particular person pays for it. Parents negotiate everything related to the car such as gas, repairs and upkeep.
Homeowner insurance coverage depends on who is listed on a mortgage. If both spouses’ names remain on the mortgage, they both remain on the homeowner insurance coverage as well. However, the parent who moves out should still obtain renters or homeowner insurance at his or her new residence.
In terms of life insurance, each spouse should consider updating any beneficiary information on existing policies. The policy pays out to the beneficiary upon the policyholder’s death, regardless of that person’s current legal status with the beneficiary. Parents not comfortable with keeping a former spouse’s name on a policy often set up a trust fund for the children. The fund is then named as beneficiary.
One parent is usually required to provide life insurance for any minor children along with the former spouse. The amount of life insurance is regularly adjusted based on the paying spouse’s other monetary responsibilities.
Divorcing couples can benefit from the advice of an experienced family law attorney. The attorney can provide valuable assistance and help obtain a fair and equitable insurance division.