What Types of Insurance Policies Do I Have?

​Often, people think of property in terms of tangible items, and this is understandable.  It’s important not to overlook non-tangible property however – not only things like retirement and pension accounts, but also things like insurance policies, which have definite value, and which must be addressed as you prepare to move forward down two separate paths. As you prepare to negotiate and divide your property during the divorce, it can be helpful to maintain a detailed inventory of all of your existing insurance policies, as well as all of the designated beneficiaries on those policies. 
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Depending upon the particular circumstances one spouse may be required to maintain the other spouse on their insurance policy for any number of reasons, so it is also important to consult with a knowledgeable and experienced attorney as to your circumstances before making any final decisions one way or the other. In addition, as you prepare for divorce, it can be helpful to begin the process of obtaining quotes for new policies if you will be canceling your old ones. Doing so will save you time and headache in the long run.

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• Health Insurance

For many couples, one spouse is covered by the other spouse’s policy.  If this is the case, the spouse who does not actually hold the policy may feel worried that they will lose their coverage during the divorce process.  The good news is, that this is not necessarily the case.  Continued coverage is typically provided by the federal Consolidated Omnibus Budget Reconciliation Act, better known as COBRA.  COBRA insurance coverage typically takes effect after someone loses employer-provided coverage for whatever reason.  COBRA insurance coverage can last for up to 36 months after the regular insurance policy ends.
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Many rely on COBRA coverage after a divorce until they can arrange for a new policy.  It is, however, always a wise decision to contact your insurance company to discuss the divorce, as well as what steps might need to be taken (and what costs will be incurred) to continue the coverage.  It should also be noted that in some settlement agreements as part of the property division between the parties, one spouse agrees to cover the full or partial COBRA payments for the spouse and/or children who were formerly named on the regular insurance policy.

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• Automobile Insurance

As you begin to make decisions about dividing your property, you will, necessarily, have to determine what to do with your vehicles.  As you consider changing the details of your insurance policies, it is important that you ensure that you have also made certain that the vehicles are titled in the names of the respective spouses who will receive them as part of the property division. It is also important to be aware that most insurance companies require written consent from the person who is being removed from the policy, so it is often necessary to notify your spouse before you actually make the policy changes.  Reviewing these matters with an attorney to be sure that you have properly effectuated title transfers and taken other necessary steps before officially changing the policies is always a wise decision.

• Homeowner’s Insurance

When determining how to handle your homeowner’s insurance policy during a divorce, it is important to look at whose name is on the deed to the property.  While many couples jointly own a home, other couples live in a home where only one spouse’s name is on the deed.  Regardless of your particular circumstance, it will be important, after determining who will remain in the marital home, to contact your insurance provider to notify them that the other spouse has moved out. You may not necessarily need to change the names on the policy during separation, but after an absolute divorce is granted, it will be very important to ensure that the policy contains the name of the correct homeowner.

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• Life Insurance

There are two types of life insurance – term life insurance, which lasts for only a set term, and permanent life insurance, which lasts until the policyholder passes away, and has a cash value.  Term policies typically do not have a cash value, and as a result, are not taken into account as assets when property is divided, although permanent policies do have a cash value and will therefore be counted as assets.
 
If one or both spouses have life insurance policies, the beneficiaries and terms of those policies will need to be reviewed and possibly negotiated during the property division process.  It can be helpful, after an absolute divorce is granted, to provide the divorce decree to your insurance company and instruct them to notify all beneficiaries of any policy changes or missed payments. This can help to ensure that the policy premiums continue to be maintained, and that the policy remains active, and up-to-date with the appropriate beneficiary information.

It can be helpful to consider how the insurance policy might fit into your overall estate plan, as life insurance proceeds are generally included in the estate. Some choose to use a helpful planning tool called an Irrevocable Life Insurance Trust, or ILIT.  An attorney who understands family law and estate planning will be able to advise you as to whether a tool like this might be helpful in your particular circumstances.
 
If you and/or your spouse do not have life insurance policies, this does not necessarily mean that you should entirely ignore this issue during your divorce.  In some situations, couples who are divorcing and do not have insurance are actually ordered by the court to acquire insurance.  Typically, this occurs in a situation where the divorcing couple has children, and one spouse earns significantly more than the other.  In that situation, the court will often order the spouse who earns more income to obtain a life insurance policy naming the ex-spouse as a beneficiary in order to ensure future financial security in the place of standard support obligations if the higher-earning spouse passes away.

Contact Adkins Law if you need to speak with an experienced Huntersville family law attorney to arrange a consultation. One of our Huntersville divorce lawyers can arrange a consultation with you to discuss your family law matter in detail. 

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