A Massachusetts divorce can be a complex and lengthy process with a variety of emotional, practical, and financial implications for both spouses, and any children that may be impacted. During such a stressful time, it can be easy to overlook basic items like the family’s insurance coverage. Nevertheless, it’s important to review all insurance policies to determine how your coverage may change once the divorce is final and, more importantly, how you can prepare.
The two primary types of insurance that typically come into play during a divorce are health insurance and life insurance.
It’s common for one spouse to be covered under the other, often higher-earning, spouse’s employer-sponsored health plan. The Consolidated Omnibus Budget Reconciliation Act (COBRA) was passed in 1986 to help non-income-earning spouses after divorce, allowing them to continue their coverage under their ex-spouse’s employer plan for up to three years.
While COBRA can be a convenient bridge in coverage, it’s typically not the most cost-effective solution for the spouse paying the premiums, which are typically the employer and the employee’s share of the premium, plus up to 2% additional for administrative costs. Additionally, the three-year limit makes it a short-term solution at best. With the passage of the Affordable Care Act in 2010, more affordable health insurance options may now be available for people who don’t have access to their own employer-sponsored health plan, even if they have pre-existing conditions. These options are worth exploring before signing up for COBRA.
Life insurance can be an important consideration in divorce, especially for anyone expecting to receive alimony or child support. Alimony typically stops when the payor is deceased. However, unless the recipient of alimony inherits other assets to replace the spousal support payments, the stream of payments can be sustained by a life insurance policy on the payor.
Sometimes life insurance is required as part of a divorce settlement. When this is the case, it’s typically best for the recipient spouse to own the policy and make the required premium payments. This way, the recipient spouse retains control over the policy, ensuring that no changes are made or lapses in payment occur without his or her knowledge.
Finally, any life insurance needed should always be put in place before the divorce is final. If the payor spouse turns out to be uninsurable, appropriate modifications to the divorce agreement can still be made.
Like any issue that comes up during divorce, determining how to handle changes in insurance policies and coverage may not always be as straightforward as they seem. It’s important to be aware of all existing policies going into the divorce, as well as any new policies you may need as a result of the settlement. Since insurance can be a complicated topic with a variety of options, it may be helpful to seek the help of a licensed insurance professional or financial advisor to determine the best solutions.
Should you be in the midst of a divorce or contemplating divorce, contact the Law Offices of Renee Lazar at 978-844-4095 to schedule a FREE one hour no obligation consultation.