While health and life insurance are not necessarily the most exciting financial topics, the number of individuals Googling the terms has skyrocketed during the Coronavirus pandemic. More than ever, people seem to be realizing just how important health insurance is during this time of COVID, and the benefits of life insurance, if there were to be an untimely death. Figuring out the right health and life insurance for you and your family is absolutely critical – and especially so for women going through divorce.
When it comes to health insurance, there is a myriad of choices that can be quite confusing, especially if you are going through a divorce. One of the most unsettling fears around getting a new plan is ensuring that there is no gap in coverage.
If you rely on your partner’s health insurance plan for coverage during your marriage, you have the option to continue with the same health plan, but there are several factors to consider. A Federal law known as Consolidated Omnibus Budget Reconciliation Act (COBRA) requires the company to offer family members continued coverage under the group plan for up to three years after a divorce. However, your ex-spouse must work for a company with 20 or more employees, and you will be responsible for paying the entire cost of the medical insurance premium, without any contribution from the employer. The bill may produce quite a bit of sticker shock.
If you’re employed, be sure to look into the group medical insurance that is offered through your employer. Most companies will pay a portion of the premium, making health insurance a little more affordable. Even if you are not employed, you may find a lower-priced policy on your own, if you are in good health.
Just as with any other property in a divorce, you need to determine who will be the owner of your various insurance policies. Whoever is the owner of each policy can name a beneficiary. Ideally, if you are the lower earner, you should own a life insurance policy on your ex-spouse so that you can continue to pay for expenses even if he dies, and child support and alimony payments stop. You can consult with your attorney about including a provision for life insurance on the provider of alimony or child support to make sure that you are protected.
With your ex-spouse no longer in the picture, you will also want to purchase life insurance that would pay out in the unfortunate event of your death. This money would go into a trust for the benefit of your children, so that they can live comfortably with all the opportunities you wish for their future. You will need to name a trustee who will oversee how the life insurance proceeds are invested and the funds are disbursed to the children.
To determine the minimum benefit amount, calculate how many years you have until your youngest child turns 21, and multiply this number by your annual expenses. For example, if your expenses are $100,000 per year and your youngest is ten, life insurance with a death benefit of $1,100,000 (11*100,000) would support your child until she is age 21, with some money left over for college and to get a solid start in life.
Choosing a large enough benefit amount is sensible as long as the premiums are not too burdensome. Term insurance has the benefit of being much less expensive and is used to cover a specific period of time. In the example, above, getting a term life insurance policy of 15 or 20 years will more than cover the time until the kids are independent. Other factors that will impact the cost of the insurance include the death benefit amount, as well as age, health, and any previous medical conditions of the applicant.
As a divorce financial planner, I know that discussing insurance may not always be at the top of your to-do list. However, the importance of having a plan in place should move this subject higher on your radar. Unfortunate events may be hard to imagine or seem premature to plan for, but both life and health insurance are key factors in securing the safety of you and the futures of your loved ones.