Informing Exes: Insurance Update Protocols

If you and your ex-spouse shared a health insurance plan, you may need to make new coverage plans after getting divorced. If you were getting coverage under your ex-spouse's plan, you may be able to include a requirement in the divorce settlement that your former spouse continues to provide coverage for you and your children. On the other hand, if your ex-spouse was covered under your plan, your insurance may charge them an additional premium after the divorce. In the US, a law known as COBRA allows you to stay on your former spouse's plan for up to 36 months after getting divorced, but you will have to pay all the monthly premiums yourself.

Health insurance after divorce

Divorce is a challenging transition, and it's important to understand your options for health insurance during separation and after divorce. Here are some key considerations and options to explore:

Continuation of Coverage During Divorce Proceedings

It's important to note that health insurance coverage should continue as it was during the marriage until the divorce is finalised. This means that the health insurance policies must remain in place, providing the same level of coverage for both spouses and their children, until all divorce issues are resolved.

Once the divorce is finalised, former spouses will need to make changes to their health insurance arrangements. Here are some options to consider:

• COBRA Coverage: The Consolidated Omnibus Budget Reconciliation Act (COBRA) allows individuals who lose health coverage due to divorce to continue their group health plan for a limited time. Under COBRA, you can stay on your ex-spouse's employer-provided insurance for up to 18 or 36 months, depending on the circumstances. However, you will need to pay the full premium, including both your share and the employer's share, which can be expensive. To be eligible for COBRA, you must notify the health plan administrator within 60 days of the divorce.
• Employer Health Insurance Plan: If you have access to health insurance through your own employer, this can be a more cost-effective option than COBRA. Losing health coverage due to divorce triggers a special enrollment period, allowing you to sign up for your employer's plan outside the usual enrollment window.
• Affordable Care Act (ACA)/Obamacare Plan: You can purchase health insurance through the state exchange or outside the exchange. ACA plans offer different levels of coverage (bronze, silver, gold, or platinum) and cover essential health benefits, including emergency services and mental health services. You have 60 days after your divorce to enroll in an ACA plan during the Special Enrollment Period.
• Short-Term Health Insurance: If you need temporary coverage while exploring other options or until you obtain employer-provided insurance, short-term health insurance can be an affordable solution. However, these plans usually have limited benefits and may not cover pre-existing conditions. The duration of coverage varies by state, typically ranging from 6 to 12 months.

Including Health Insurance in the Divorce Settlement

Health insurance can be included as part of the divorce settlement. For example, you can request that your spouse provide health insurance coverage for you and your children, or you may be required to do so. Additionally, if you have children, their coverage will be determined as part of the parenting and child support agreements.

Health Insurance for Children

It's important to note that children will not automatically be dropped from a health insurance plan after divorce. Their coverage may continue under both parents' plans if they are insured under both before the divorce. Additionally, in some states, the court may order one spouse to maintain health insurance coverage for the children.

Court-ordered life insurance

The amount of the policy is usually based on the financial obligations outlined in the divorce settlement. For example, if the paying spouse is required to pay $2,600 annually per child for child support, and there are three children, the policy amount would be calculated as follows:

> 17 years (total number of years of support) x $2,600 per year = $44,200

So, the paying spouse might be ordered to take out a life insurance policy worth $45,000.

Who should be named as the beneficiary?

The insured spouse often names their ex-spouse as the beneficiary, especially if they are the primary custodian of the children. However, this could lead to potential issues, such as the ex-spouse using the funds for their own gain rather than for the children's support.

An alternative option is to name the child as the primary beneficiary. However, this may not be ideal if the paying parent dies while the child is still a minor, as the court would then appoint a guardian to manage the funds, which could result in delays and complications.

A recommended solution is to name a "custodian" as the beneficiary. This ensures that the funds are managed by a trusted individual until the child reaches the age of majority or until the trust terminates, typically at age 21.

How to apply for court-ordered life insurance:

It is advisable to start the life insurance application process as early as possible, ideally at least six months before the court's deadline, to avoid last-minute rushes. The process can take up to six weeks, or longer if additional information is required.

It is essential to communicate the details of the policy with your ex-spouse and respective lawyers, including the term length, coverage amount, ownership, and payment of premiums.

Proof of the policy for the court:

You may be required to provide proof of the policy for the court. In this case, your broker or the insurance company can provide a copy of the signed application or a receipt of payment.

Tips for purchasing life insurance after a divorce:

• Determine the amount of coverage you need, considering factors such as childcare costs, dependent care, debt repayment, income replacement, and end-of-life expenses.
• Choose the type of life insurance policy that best suits your needs. Term life insurance is often sufficient for covering child support or alimony for a specified period. Permanent life insurance may be more appropriate in cases where there is a continuous need for financial protection.
• Compare rates from different insurance carriers and consider working with a broker who can help you find the best policy for your circumstances.

Working with your ex-spouse:

It is important to keep your ex-spouse informed about any decisions or changes regarding existing or new life insurance policies. Making decisions unilaterally could complicate the divorce proceedings or result in unintended consequences.

Seeking legal advice:

Divorce proceedings and court-ordered life insurance mandates can be complex and vary depending on your specific circumstances. It is highly recommended to consult with a lawyer and an independent life insurance agent to ensure you understand your rights and obligations and make informed decisions.

Letting your ex-spouse know about the insurance change

Letting your ex-spouse know about an insurance change is a necessary part of the divorce process, especially if you share insurance policies. Here are some steps and considerations to help you navigate this situation:

Health Insurance

If you and your ex-spouse are on the same health insurance plan, you will need to make changes following your divorce, as it is considered a qualifying life event. You have several options:

• Sign up for health insurance through your employer: If you have an employer-sponsored health plan, you can enrol in their health insurance programme. This is often the easiest and most cost-effective option.
• Purchase private health insurance: You can buy a health insurance policy from a private insurer or through the government health insurance marketplace.
• Elect COBRA coverage: You may be able to stay on your ex-spouse's health insurance plan temporarily through the Consolidated Omnibus Budget Reconciliation Act (COBRA). This allows you to continue accessing their employer's group health benefits for a set period, but it can be expensive as you will be responsible for the full premium amount.
• Notify your children's coverage: If you have children, you will need to decide whose health insurance plan they will be on. Children can usually stay on the existing insurance plan as dependents, but you can also switch them to the other parent's insurance or put them on both plans if needed.

Car Insurance

The necessity for separate car insurance policies depends on where your cars are kept overnight:

• If your cars are kept at the same residence, you can either stay on the same policy or choose to get separate policies. Staying on the same policy can be more convenient if you share cars and may provide potential discounts.
• If your cars are parked at different residences, you will need to separate the cars onto different auto insurance policies.

Home Insurance

If you own a home, ensure that the homeowners insurance policy is under the name of the homeowner. If there is a change in ownership, occupancy, or personal property, notify your insurer to update your policy accordingly. If you are renting, consider getting renters insurance.

Life Insurance

Life insurance policies can be more complicated, especially if your ex-spouse is listed as the beneficiary. Here are some key points to consider:

• Court-ordered life insurance: During divorce proceedings, the court may require one spouse to maintain life insurance for a specified period, with the ex-spouse as the beneficiary. This ensures that alimony and child support payments are secured in the event of the paying spouse's death.
• Changing beneficiaries: If you no longer wish to have your ex-spouse as the beneficiary, you can remove them and choose another family member or entity to receive the death benefit. However, if you share children, it may be beneficial to keep your ex-spouse as the primary beneficiary to provide financial assistance in the event of your death.
• Obtaining new life insurance: If you will be making alimony or child support payments, consider getting a new life insurance policy to provide a safety net for your children and ex-spouse if something happens to you.

Disability Insurance

If alimony or child support payments are involved, you can include a provision in your divorce agreement for your ex-spouse to obtain disability coverage. This ensures that you continue receiving these payments even if your ex-spouse can no longer work.

In conclusion, it is important to address insurance changes during and after your divorce to ensure that you, your ex-spouse, and your children maintain appropriate coverage. It is recommended to consult with a divorce lawyer and insurance agents to navigate these changes effectively.

Qualifying for a special open enrollment period

If you experience certain life events, you may qualify for a Special Enrollment Period (SEP) to change your health insurance plan outside of the yearly Open Enrollment Period. Depending on the type of Special Enrollment Period, you may have 60 days before or after the event to enrol in a new plan.

Loss of Health Coverage

• Losing job-based health coverage
• Losing Medicaid coverage
• Losing other types of health coverage, such as CHIP or student health coverage
• Losing your spouse's health coverage due to divorce, legal separation, or death
• Losing dependent status and no longer being eligible for your parent's health plan (e.g., turning 26)

Income and Employment Changes

• A reduction in work hours or loss of full-time status, resulting in a change in eligibility for health coverage
• Gaining access to a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) or Individual Coverage HRA
• An income increase or decrease that affects your eligibility for subsidies or cost-sharing reductions
• Starting a new job and gaining eligibility for health coverage

Family Changes

• Getting married
• Having a baby, adopting a child, or fostering a child
• Gaining or losing dependents

Residential Changes

• Moving to a new ZIP code, county, or state
• Moving back to the US from abroad or to a different state within the US

Other Life Events

• Becoming a US citizen or lawful permanent resident
• Leaving incarceration
• Experiencing a natural or human-caused disaster
• Returning from active military service
• Gaining membership in a federally recognised tribe or becoming an Alaska Native Claims Settlement Act (ANCSA) Corporation shareholder

It's important to note that the requirements for qualifying for a Special Enrollment Period may vary by state and the specific health insurance plan. Therefore, it's always a good idea to check with your state's official website or the health insurance provider to understand the specific rules and requirements for your situation.

Understanding the impact of insurance change on alimony or child support payments

When a couple divorces, they need to consider the impact of insurance changes on alimony or child support payments. Here are some key points to understand:

Impact on Alimony

If one spouse depended on the other for health insurance during the marriage, the court may require the supporting spouse to continue providing health insurance after the divorce. This is especially true if the dependent spouse cannot afford insurance on their own. The divorce settlement might include an alimony payment that enables the dependent spouse to buy health insurance. The cost of health insurance should be considered when determining the appropriate amount of spousal support.

Impact on Child Support

Child support payments are typically based on factors such as child support guidelines, each parent's income, earning potential, and housing situation. If there is a change in these circumstances, such as a job loss or a promotion, a modification to the child support order can be requested through a court hearing or a child support review process.

Changes in health insurance coverage can also impact child support payments. If a parent is court-ordered to carry medical insurance for their child but can no longer do so, they can request a review of the child support order. The order may be modified to require the non-custodial parent to reimburse the custodial parent for their share of the insurance coverage or to find private insurance at a reasonable cost.

Notification and Documentation

It is important to notify your ex-spouse about any changes to insurance coverage, especially if it will impact alimony or child support payments. Proper documentation of these changes is crucial and may be required by the court. This includes providing proof of income, expenses, disability status, custody arrangements, and any other relevant information.

Beneficiary Changes

In most cases, an ex-spouse is no longer considered to have an insurable interest, and term life insurance policies are usually shielded from the divorce process. However, a divorce agreement may mandate that an ex-spouse take out life insurance coverage, especially if there are children involved. This is to protect the financial interests of both parties and their dependent children.

Cost Considerations

The cost of health insurance and medical expenses can be substantial and should be factored into alimony and child support payments. If one spouse has health insurance available through their employer, the divorce order may require them to maintain coverage for their child, and these costs can be balanced by adjusting alimony or child support payments accordingly.

Legal Assistance

Given the complexity of insurance changes during a divorce, it is highly recommended to consult with a family lawyer or divorce attorney. They can advise on state laws, protect your rights, and help negotiate a fair settlement that considers the cost of insurance and medical expenses.

Frequently asked questions