Life Insurance: Enrolling Life Events For Coverage

Life is full of surprises, and sometimes your insurance coverage needs to change with it. A qualifying life event (QLE) is a change in your life that impacts your insurance coverage and allows you to enroll in a new plan or make changes to your existing plan outside of the regular annual Open Enrollment Period. This is known as a Special Enrollment Period (SEP). Most SEPs last for 30 to 60 days before or after the qualifying event, and you can make changes to your health insurance plan, dental insurance, and other insurance benefits.

Marriage, divorce, or separation

Life events such as marriage, divorce, or separation can have a significant impact on your life insurance needs. Here are some essential things to consider regarding life insurance when facing these life changes:

Marriage

When you get married, it is common to list your spouse as the primary beneficiary on your life insurance policy. This ensures that they can maintain financial stability and manage any shared debts or financial obligations in the event of your death. Marriage is also a qualifying life event that allows you to make immediate changes or sign up for a new health insurance plan outside of the annual Open Enrollment Period.

Divorce or Separation

Divorce or separation can be a complex process, and it is crucial to review and update your life insurance policy to reflect your new circumstances. Here are some key considerations:

• Update beneficiaries: Most married individuals list their spouse as the primary beneficiary. After a divorce or separation, you may want to remove your ex-spouse as the beneficiary, especially if there are no children involved. You can designate your children as beneficiaries, but if they are minors, consider creating a trust to manage the proceeds. Alternatively, if the divorce is amicable and your ex-spouse has custody of the children, you may still wish to leave the death benefit to them.
• Account for cash value in permanent policies: If you have a permanent life insurance policy, such as whole life or universal life, it may have accumulated cash value. In a divorce, this cash value may be considered a marital asset and subject to division by the court. Contact your insurance provider to understand your options for dividing or accessing this cash value.
• Protect alimony and child support: If you are receiving or paying alimony and child support, consider maintaining a life insurance policy on your ex-spouse. This ensures that you or your children will continue to receive financial support in the event of their death. The benefit amount should be sufficient to cover the loss of income.
• Consider the needs of dependent children: If you have minor children, especially if you share custody, consider purchasing a term life insurance policy to protect their financial interests. The benefit amount should be enough to cover child support and any additional costs, such as childcare, until they reach adulthood.
• Review and adjust coverage: Evaluate your existing life insurance coverage and make adjustments as needed to reflect your new financial situation. Consider factors such as income, debts, and the cost of raising children.
• Court-mandated life insurance: In some divorce cases, the court may order one or both spouses to purchase life insurance as part of the settlement, especially if there is a significant income disparity. This is done to ensure financial protection for the lower-earning spouse and any dependent children.

It is important to consult with a knowledgeable insurance professional or financial adviser to guide you through these decisions and ensure that your life insurance arrangements align with your new circumstances following a divorce or separation.

Having a baby, adopting a child, or fostering

If you have given birth or received a child through adoption or fostering, you will likely need to provide documentation to your insurance provider, such as birth certificates and adoption records. It is important to notify your health insurance provider as soon as possible and provide the necessary documents to ensure that your child is covered.

In terms of life insurance, while it is not a legal requirement to insure your baby or child, there are several benefits to consider. Life insurance for your child can provide financial protection and peace of mind in the event of an unthinkable tragedy. It can help cover funeral costs, which can amount to thousands of dollars, and give you time to grieve without the added stress of financial worries.

Additionally, purchasing life insurance for your child at a young age can secure a low monthly premium, and they are likely to be guaranteed coverage as an adult, even if they develop a medical condition that would otherwise make obtaining insurance challenging. You can choose between term life insurance, which provides coverage for a set period, or permanent life insurance, which lasts a lifetime and often includes an investment component. Permanent life insurance tends to be more expensive but can offer additional benefits, such as cash value accumulation, which can be used for future expenses like education, a first car, or a down payment on a home.

Loss of health coverage

The loss of health insurance coverage is a qualifying life event (QLE) that allows you to enroll in a new health insurance plan outside of the annual Open Enrollment Period. This typically includes circumstances where you or a member of your household loses their existing health coverage. Here are some scenarios that may qualify you for a Special Enrollment Period (SEP) due to a loss of health coverage:

Losing Job-Based Coverage

If you leave your job and lose your job-based health insurance, you are eligible for an SEP. This also applies if you have the option to keep your coverage with COBRA. Losing job-based coverage includes scenarios where your employer exits the market or your employer reduces your hours, resulting in a loss of health benefits.

Losing Coverage Through a Parent's Plan

Turning 26 and losing coverage through a parent's insurance plan is considered a QLE. This typically happens when an individual ages out of their parent's health insurance plan and needs to enrol in their own plan.

Losing Eligibility for Medicare, Medicaid, or CHIP

Losing eligibility for government-provided health insurance programs like Medicare, Medicaid, or the Children's Health Insurance Program (CHIP) qualifies as a QLE. This may occur due to changes in income, age, or other factors that affect eligibility.

Other Types of Coverage Loss

Losing other types of health coverage, such as individual plans, student plans, or short-term plans, may also qualify as a QLE. However, it's important to note that not all types of coverage loss are considered qualifying life events. For example, losing coverage due to non-payment of premiums or voluntary cancellation typically does not trigger an SEP.

Steps to Take After Losing Health Coverage

If you experience a loss of health coverage, there are several steps you can take to secure new coverage:

• Act quickly: Most SEPs have a limited timeframe, typically 30 to 60 days before or after the qualifying event, during which you can make changes to your health insurance plan.
• Gather required documentation: You may need to provide proof of your previous coverage, such as a letter from your employer or insurance company verifying the loss of coverage.
• Explore your options: Research different health insurance plans available to you, such as purchasing coverage through the Health Insurance Marketplace, joining a spouse's or parent's plan, signing up for Medicaid, or buying short-term health insurance.
• Compare plans and costs: Consider the benefits, coverage options, and prices of different plans to find one that meets your needs and budget.
• Enroll in a new plan: Once you've found the right plan, complete the enrolment process within the specified timeframe to ensure continuous coverage.

Changes in residence

Impact on Insurance Options

The most significant effect of changing your residence is the potential impact on the insurance options available to you. Moving to a different zip code, county, or state may result in a change of your health plan area. This could lead to differences in the insurance providers, plans, and coverage options that are available at your new location. It is important to review and compare the options at your new residence to ensure you have suitable coverage.

Global Coverage for Life Insurance

If you have a life insurance plan and are relocating, it is recommended to inform your insurance provider about the change in residence. In most cases, life insurance plans offer global coverage, and your policy will remain valid even after moving. However, your insurer may require a declaration of your new location. Usually, there is no difference in premiums for residents and non-residents.

Re-evaluation of Terms

In certain cases, if you move to a country deemed 'high-risk' due to civil or political unrest, a high crime rate, or a poor standard of living, your insurance provider may re-evaluate the terms of your insurance. This could potentially result in changes to your coverage or premiums.

Health Insurance Considerations

Health insurance benefits, on the other hand, are often restricted to specific geographical areas or jurisdictions. If you frequently travel or move between locations, it may be advisable to have separate health plans for each place of residence. This ensures that you have adequate coverage regardless of where you are.

Documentation Requirements

When enrolling in a new plan or making changes to your existing plan due to a change in residence, you may be required to provide documentation. This could include proof of residency for both your previous and new addresses. It is important to submit the necessary documents within the specified timeframe, usually 30 to 60 days, to avoid any delays or disruptions in your coverage.

Planning Ahead

Whenever possible, it is advisable to plan ahead for anticipated changes in residence. Contacting your insurer or the relevant marketplace before your move can help you understand your options, avoid coverage gaps, and ensure a smooth transition to your new insurance plan.

It is important to note that specific details may vary depending on your location, insurance provider, and the specific plan you have. Therefore, it is always recommended to consult with your insurance provider or seek advice from a qualified professional to understand how changes in residence will impact your life insurance coverage.

Death of the primary policyholder

The death of the primary policyholder is a qualifying life event that impacts health insurance coverage. In the event of the death of the primary policyholder, the policy will be terminated, and the death benefit will be paid out to the beneficiaries.

If the policyholder has named a contingent or secondary beneficiary, they will receive the death benefit. Otherwise, the benefit will go to the policyholder's estate and will be subject to probate. This can be a lengthy process and may result in delays.

It is important to regularly review and update life insurance beneficiaries to ensure that the policy reflects the policyholder's current wishes and the needs of their dependents. Marriage, divorce, childbirth, changes in relationships, and financial circumstances are all common reasons to update beneficiaries.

In the case of health insurance, the death of the primary policyholder qualifies surviving family members for a Special Enrollment Period (SEP). This allows them to apply for new health insurance coverage or make changes to their existing plan outside of the usual Open Enrollment Period.

During an SEP, individuals typically have 30 to 60 days before or after the qualifying life event to make changes to their health insurance plan or sign up for a new one. To enrol in a new plan, individuals may be required to provide documentation, such as a death certificate.

Frequently asked questions