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Divorce and Insurance
During the course of your divorce one topic that is often overlooked or taken for granted is insurance. It seems to be one of those things that people don't think about until they need it. The lack of adequate can lead to financial ruin. When you separate you should take a look at all your insurance policies including:

HEALTH INSURANCE

Health insurance coverage is something that must be dealt with in the final divorce agreement. Who pays for what should be stated clearly so that there is no uncertainty after the fact. If there are children involved you and your spouse must come to an agreement on who will carry coverage for them. Typically whoever had the coverage for the children before the divorce would continue that coverage. You must also decide who is responsible for unreimbursed medical expenses for the children. A general rule of thumb is that each parent is responsible for a percentage of these expenses.

COBRA - If you had medical coverage through your spouse's employer-sponsored health plan before you became legally separated or divorced you may be entitled to continued coverage under the COBRA law.

In 1985 Congress passed the Consolidated Omnibus Budget Reconciliation Act (COBRA) which provides for the continuation of group health insurance that otherwise would be terminated. It contains provisions giving certain former employees, retirees, spouses and dependent children the right to temporarily continue their health coverage at group rates. The act applies to employers with 20 or more employees. Under this act, any person who would lose employer-based coverage because of divorce can choose to purchase continued coverage for up to 36 months.

As you can see there are guidelines and restrictions to the COBRA law.. If you qualify, the coverage is not automatic. You need to contact the employer within 60 days of the divorce and complete the necessary paperwork. The employer is not responsible for the payment of your premiums. That is the responsibility of you or your ex-spouse, depending upon the terms of your divorce settlement.

If for some reason you do not qualify for COBRA coverage it would be in your best interest to consider some sort of medical coverage. Understandably health insurance is extremely expensive. If you are unable to afford a standard health insurance policy, you might want to consider a policy that would cover catastrophic medical emergencies.


LIFE INSURANCE

Most people already have a life insurance policy of some sort. If you do, you should carefully review it to insure that it is sufficient for your new needs. You may want to change your beneficiary as well. Check your specific state divorce statutes as some states will not allow changes to be made during divorce proceedings.

If you now provide the majority of support for any dependants you may need to increase the amount of your policy. You may also want your spouse to carry coverage if you depend on their income for child support and/or alimony. This is an issue that should be clearly stated in your separation or divorce agreement.

When deciding on how much life insurance you need you should take into consideration your current and future financial needs. Do you have children that will be attending college?

DISABILITY INSURANCE

Most people don't think about becoming disabled. However, some statistics show that if you are under the age of 65 you are twice as likely to become disabled as you are to die.

Disability insurance pays the insured a monthly benefit in the event that the insured person is unable to work. The amount of the benefit can be either a percentage of the insured's income or a specific dollar amount.

This type of insurance is important if alimony and or child support payments are being made, especially if the payor has no other source of income to make those payments.

Many people believe that Social Security will provide coverage if they become disabled. Social Security has very specific guidelines that it follows with varying benefit levels for disability claims. The amount you would receive from Social Security is based upon your earnings and your age at the time of disability. A disabled claimant will receive the same monthly benefit that he or she would receive had he or she retired at full retirement age (65 years old or more depending on age). The sum of money received will depend on one's previous work record.

The monthly cash benefit for a worker that was disabled in 2005 had a maximum of $1939.00 per month. Remember those are the MAXIMUM payments. According to the Social Security Administration, the average retired worker will receive estimated monthly benefits of $955 in 2005.

Before purchasing disability insurance your should consider what your need would be in the event you became disabled. Look at your budget. What expenses do you have in addition to normal living expenses? What if any of these would not apply if you were disabled, such as commuting costs? What expenses would increase? Do you have any other sources of income, such as investment income that you could use? Speak to an insurance specialist who will be able to help determine specifically what your needs are.


HOMEOWNERS/RENTERS

Homeowner's and Renter's insurance covers the value of the items in your residence against damage and/or theft. There are certain limitations to these policies so it is wise when you move into a new place to do an inventory of your possessions in order to determine your needs. Some items are only covered to a certain amount in standard policies. If you have items of value such as antiques, jewelry or collectibles you may need what is called a "floater" to cover these items. Every policy is different so speak to your insurance agent for a policy that will meet your specific needs.

AUTO

Auto insurance covers damage to your vehicle and damage that it may cause to another person's property. Auto insurance is regulated by the state in which you live so every state is different. When you separate inform your insurance agent. Remember, if you and your spouse were on one policy you may need to get separate policies if not living in the same residence. Your separation agreement should clearly state who is responsible to pay auto insurance premiums.

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