In the majority of cases, married couples share their insurance plans with each other. New Jersey couples may be interested to know that at the time of divorce, separation and settlement of the insurance plans has become very challenging. While going through a divorce, splitting up the property is not the only issue. Insurance plan provisions should also be included in the provisions of the settlement agreement. Health, life, auto and home insurance should all be reviewed thoroughly to avoid being over insured, underinsured or uninsured.
Even after divorce, many couples continue with the same health insurance plan. Though this option may seem alluring, if the insurance company discovers this practice then the couple’s insurance may be dropped for insurance fraud. To avoid fraud, it is always advisable for divorcing couples to at least apply for temporary coverage under the spouse’s plan. With time, a separate insurance plan should be investigated. Minor child coverage should also be researched.
A life insurance policy after divorce requires special attention. Because life insurance is in the name of the owner and the spouse is often covered under an attached policy, the owner can make the decision to delete the names of the beneficiaries. Hence, it is essential for the spouse to be released from the policy, adjust details and buy a new policy in order to add the name of a different beneficiary. The insurance coverage may need to be calculated into the divorce settlement. Also, the ex-spouse’s name should be removed from other healthcare directives.
In the case of car insurance, it is advisable to include the repayment amount in the divorce settlement to avoid removal from a joint car insurance policy. If the couple has homeowner’s insurance, it can be reduced by half if the ex-spouse has taken half of the belongings. If the spouse has moved out and has rented a home, a renter’s policy should be considered.
When it comes to divorce settlement, simple property settlement is usually not enough. The long-term interests of the parties should also be addressed. Insurance settlements can be complicated. But a well-planned strategy can help protect the parties’ interests. The divorcing parties should take into account the law of the state they live in as well as professional help while planning for a divorce settlement.
Source: Reuters, “How to Untangle your Insurance Plans in Divorce,” Geoff Williams, Sept. 11, 2012