Financial conversations are some of the most heated parts of the divorce process- from dividing shared debts to alimony and child support. But what if a few years post divorce some of these financial securities were suddenly lost?
Divorce should also be about backup plans. Insurance policies are the best financial backup plans, according to the Phoenix divorce lawyers at Gillespie, Shields, Durrant & Goldfarb. Yet, all too often they are left out of the divorce proceedings.
Divorce attorneys and their clients should mind the “pesky” insurance details during their divorce negotiations to protect their families from future financial devastation.
The three most important? Life insurance, health insurance and disability insurance.
While divorcees may forget about life insurance policies, especially if none currently exist, it’s often a top priority for the involved divorce lawyers and financial planners. This is particularly true for divorcing parents, as life insurance can help replace child support payments after a sudden death.
There’s many types of life insurance policies designed to fit differing needs. But for divorces with no current policies, attorneys typically suggest buying a simple 20-year term life insurance policy for middle-class families with young children or a 10-year term life policy if the children are older. Generally, term life policies are cheaper and less of a hassle than whole or permanent insurance, which don’t expire after a designated number of years.
When researching term life policies, keep in mind:
- The length of time your beneficiary will need this security measure; timing could coincide with the end of child support and alimony payments or when the house is paid off
- Carefully consider the policy amount and how much your children would need to replace part of your income or child care costs, for example
If spouses are under their own employer’s insurance coverage, there’s no post-divorce issues for health insurance. This is a rarity, however, and spouses can legally not stay on their ex-spouse’s employer-sponsored health plan.
Here are a few options to explore:
- Sign up through your own employer-sponsored health plan; divorce is a special circumstance that qualifies non-new employees from signing up.
- Sign up for a policy directly through a health insurance company or your state’s marketplace
- Sign up for COBRA insurance, a federal program that requires businesses of at least 20 people to continue offering health coverage to those who would otherwise lose it, like ex-spouses, for up to 36 additional months. COBRA can be extremely costly, however, as employers do not have to continue paying some of the costs and may even charge the employer 102% of the total costs.
Spouses should research their various health insurance options and select the most practical plan for them. Divorce attorneys can help with health insurance negotiations if need be.
Unbeknownst to many, financial experts say disability insurance should be a top financial priority for couples and individuals, right behind life insurance. The American Institute of CPAs also strongly suggests couples discuss disability insurance during divorce.
According to the Social Security Administration, 20-year-olds have a one in four chance of becoming disabled before retirement. Should this tragedy happen, disability insurance will supplement a portion of lost income. Five states currently provide or require employers to provide short-term disability benefits; other individuals may look for short and long-term disability insurance coverage outside of their company.
Some ways to get coverage include:
- Buy disability through your employer; while this may be an all out-of-pocket expense, employers are often offered group rate discounts.
- Buy disability through a professional association; again, group rates may be available.
- Buy disability directly from an insurance broker or company; generally, this will be for long-term disability coverage.
The Gillespie, Shields, Durrant & Goldfarb family law experts generally suggest individuals have their own disability coverage if they earn income. However, if one party will be relying on alimony or child support as a primary income source, they should ask for the divorce agreement to require their former spouse to carry such coverage.
Insurance matters can be a complicated nuisance during divorce. But protecting your finances, especially ones you’ve spent months negotiating during a divorce, is necessary. Talk with your divorce attorney about how to appropriately and effectively bring up insurance policies to your spouse.