When people begin the divorce process, insurance is rarely the first issue that comes to mind. Most spouses are focused on children, support, retirement accounts and property. Yet a missed enrollment deadline, outdated beneficiary designation or policy that no longer reflects who owns a home or vehicle can create expensive problems after the divorce is final.
Health insurance should often be the most immediate concern. Under Ohio law, a spouse generally cannot cancel existing health coverage for the other spouse or dependents simply because a divorce or dissolution case has been filed. When the coverage existed before filing and the family members remain eligible, it generally must continue until the court determines that the policyholder is no longer responsible for providing it.
That protection does not necessarily continue after the marriage ends. A former spouse will commonly lose eligibility as a dependent under the employee’s health plan. Before the final decree, the covered spouse should review the plan documents, confirm when coverage will end and consider replacement options.
One possible option is COBRA, named for the federal Consolidated Omnibus Budget Reconciliation Act. If an employer’s plan is subject to COBRA, a former spouse who loses coverage because of divorce may be able to continue the same group health plan for up to 36 months. The principal drawback is cost. The former spouse may have to pay the entire premium, including the share previously paid by the employer, plus a small administrative charge.
COBRA also has strict procedures. The employee or former spouse generally must notify the health plan of the divorce within the plan’s required period, which must allow at least 60 days. The former spouse then receives a separate opportunity to elect coverage. Anyone considering COBRA should follow the plan administrator’s instructions rather than assume that the court or employer will handle every step. Alternative coverage plans may be available through a person’s own employer or a private individual policy. Depending on age, income, disability status and other circumstances, Medicaid or Medicare may also be available. Because enrollment windows and eligibility requirements vary, replacement coverage should be investigated before current coverage ends.
Additionally, the handling of children’s insurance during a divorce process requires separate attention. An Ohio child-support order may address which parent must maintain available, reasonably priced health coverage and how medical support will be handled. Parents should also make their agreement clear about deductibles, copayments, prescriptions, therapy, dental or orthodontic care and other uncovered expenses. It should explain what documentation is required, when reimbursement is due and what happens if the insured parent changes jobs or loses coverage.
It is critical to review life insurance policies with a sophisticated domestic attorney before you file for divorce. These policies, and any cash value attendant to them, could be marital property subject to division upon divorce. If a party does something that impacts the policy or any cash value (takes the cash, takes a loan against the policy, cancels the policy, etc.), the court might hold that person responsible for any diminution of the marital estate. Also, life insurances policies, whether held in trust or not, are often subject to the owner’s decision to change beneficiaries. So, in certain circumstances it may be advisable (or not) to change beneficiaries prior to filing for divorce. In our practice we have seen clients die during a divorce and their life insurance proceeds go to former spouses. Therefore, pre-divorce planning is essential.
Similarly, homeowners, renters and automobile coverage should also reflect the family’s new living and ownership arrangements. The spouse keeping the home should confirm that the property remains properly insured and that mortgage requirements are satisfied. Automobile policies should be updated to accurately identify each vehicle’s owner, regular drivers and primary location.
Insurance decisions should be addressed before the divorce is finalized and each former spouse should know which policies remain in effect, when coverage may end, what replacement insurance may cost and which beneficiary or ownership details must be updated. Addressing these issues early can help avoid costly problems after the case ends and a new chapter of life begins.
This article originally appeared as a column for the Cleveland Jewish News.