What You Should Do About Insurance After a Divorce
Divorce is emotionally and financially challenging. Amid all the adjustments it brings, updating your insurance coverage is one of the most important — and most often overlooked — steps.
Below is a breakdown of the insurance changes after divorce you should consider, including life insurance after divorce, auto, home, disability, and health coverage.
Auto Insurance After Divorce
If your car ownership changes as part of the divorce, you may need new coverage to match.
- Consider removing your former spouse from your policy to protect yourself from liability and keep their name off any future claim checks.
- Notify your insurance company of any address change resulting from the divorce.
Home Insurance After Divorce
Divorce often means a new living situation for one or both spouses.
- Moving into a new apartment? Consider purchasing renter’s insurance.
- Staying in your current home? You may want to remove your ex-spouse’s name from the policy.
- If your former spouse is taking jewelry or other valuables from the home, review and adjust your property coverage accordingly.
Life Insurance After Divorce
Life insurance is often used to cover financial obligations that could arise if a spouse passes away.
- If your former spouse is paying alimony or child support, consider purchasing a life insurance policy on their life. This is a common approach to protecting child support life insurance obligations if the paying spouse were to pass away.
- If you keep a pre-existing policy, review and update your life insurance beneficiary after divorce to make sure it reflects your current wishes.
Life insurance policies come with costs, including mortality and other charges. Surrendering a policy early may involve surrender charges and tax implications. Availability and pricing depend on factors such as age, health, and the type and amount of coverage. It’s worth confirming your insurability before building a strategy around life insurance. Any guarantees are backed by the claims-paying ability of the issuing insurance company.
Disability Insurance After Divorce
A disability could affect your former spouse’s ability to keep up with alimony or child support payments.
- Consider including a requirement to maintain disability insurance as part of your divorce agreement, so support payments are protected if your former spouse becomes unable to work.
Health Insurance After Divorce
If you or your children were covered under your former spouse’s employer group health plan, you have a few options:
- Contact the employer about continuing coverage through COBRA (Consolidated Omnibus Budget Reconciliation Act) after divorce.
- If you have an individual health policy, consider adding your children to it.
- Avoid duplicating coverage for your children across multiple policies.
Frequently Asked Questions
Do I need to update my life insurance after divorce?
Yes. If you’re keeping an existing policy, you should review and update the beneficiary designation to reflect your current wishes. If your former spouse pays alimony or child support, you may also want to consider a policy on their life to protect those payments.
Should I remove my ex-spouse from my auto and home insurance policies?
In most cases, yes. Removing a former spouse from auto and home insurance policies helps protect you from liability and keeps their name off claim checks or property coverage tied to items they no longer own.
What is COBRA and how does it apply after divorce?
COBRA allows you or your children to continue health coverage under a former spouse’s employer group plan for a limited time after divorce, though it typically comes at a higher cost than employer-subsidized coverage.
Can life insurance be used to protect child support payments?
Yes. A life insurance policy on the paying spouse can help ensure child support or alimony obligations are covered if that spouse passes away. This is often addressed directly in the divorce agreement.
Why is disability insurance important after divorce?
If your former spouse becomes disabled and unable to work, it could affect their ability to pay alimony or child support. Requiring disability insurance in the divorce agreement can help protect against this risk.
Get Guidance on Insurance Changes After Divorce
Sorting through insurance coverage after divorce can feel like one more overwhelming task during an already difficult time. Speaking with a financial or insurance professional can help you make sure your auto, home, life, disability, and health coverage all reflect your new circumstances.
The information in this material is not intended as tax or legal advice and may not be used for the purpose of avoiding any federal tax penalties. Federal and state laws and regulations are subject to change, which may affect after-tax investment returns. Please consult a qualified legal or tax professional regarding your individual situation.
This content is developed from sources believed to be providing accurate information. The opinions expressed and material provided are for general informational purposes only and should not be considered a solicitation for the purchase or sale of any security.
