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What happens to your insurance during divorce?

Married couples often share insurance policies, usually to save money but also to care for one another. But when spouses stop caring for one another, what happens? There are number of issues that must be tackled during divorce and insurance is definitely one of them. Often, it is a facet that involved parties neglect to address. This may be due to the many types of insurance that married couples often share: disability, long-term care, car, home, health and life. Some of these policies are more prevalent than others, particularly life and health insurance. And in a complex asset divorce, life insurance may be the most important one to address.

In some cases, life insurance may be more valuable than many of the other assets involved in a divorce. This should make the policy a priority, but many people do not address the source of the problem: the listed beneficiary. Though you may have gone through with the divorce, it does not mean that your beneficiary -- usually the spouse, former or not -- will not receive the benefits if you pass away. This is because the policy will be awarded to the beneficiary, whether married or not. Attorneys who specialize in family law are often aware of this and other overlooked issues during a divorce; this is why many people seek them out for advice when dissolving their marriages.

But what about health insurance? This form of insurance is not something that gets divided amongst a couple. In many cases, one spouse covers the entire family with a healthcare program provided by her or his employer. When the relationship ends, that spouse will likely take the partner off the policy. While this can be addressed during the divorce, some spouses will refuse to leave their former partners on the plan, eliminating their health coverage. This leaves them susceptible to major medical costs and issues and can be addressed by getting coverage through another employer or implementing COBRA, a federal law that allows individuals to stay on an ex-spouse's group policy for some time.

Source:  Fox Business, "How to Uncouple Your Insurance in Divorce" Michele Lerner, May. 31, 2013

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