TUESDAY, JULY 17, 2012
More than a million women will go through a divorce this year in the United States, if Census Bureau figures stay similar to last year’s. The emotional and psychological toll cannot be measured, but the financial impact often can.
In addition to the outright costs of a divorce that can be viewed on a spreadsheet, there are hidden financial bombs, that if not acknowledged or addressed, can explode and destroy a divorced woman’s carefully reconstructed future.
There are myriad financial traps that divorcing or divorced women face. I’m going to highlight just a few to watch out for:
If your spouse was the one that carried the health insurance benefits (and the company has more than 20 employees), then you may be eligible to continue the coverage under COBRA for 36 months. During that time, you may find employment that offers health insurance coverage, or you can look for individual coverage in the open marketplace. The latter solution becomes difficult if you have a preexisting condition. Some states do have a guaranteed program that waives a preexisting condition if you are coming from another plan. However, much is up in the air with health-care reform, so it’s best to talk with an agent to understand your options.
If you were covered as a dependent under your spouse’s group plan, you’ll need to check to see if the benefits are portable (meaning you can continue your coverage if you pay the premiums) or if the coverage terminates when you are no longer a dependent. If you are in good health, it makes sense to find out if an individual policy purchased on your own is a better deal. It may be less expensive than carrying over the group coverage. If you have a health problem, it would make sense to keep the group benefits, if that’s possible.If you have an individual policy you may be OK, although it’s smart to review the amount to make sure it is adequate for your dependents, given your new marital status. Also, in all cases, check your beneficiaries to make sure your ex-spouse is no longer listed, unless that is your intention.
Another common mistake is not to review the beneficiaries of a qualified plan (your retirement account). According to federal law, your spouse is the default beneficiary of your plan, unless a waiver is signed. When you go through a divorce, you need to make that change. Otherwise, if something were to happen to you and you were remarried, for example, your ex-spouse not your current spouse would get the money.
Disability insurance, which provides income if you become sick or injured and unable to work, becomes critical when you are single, as your support system has been cut in half. There is no longer that second salary or the same amount of savings and investments to rely on if something were to happen. This coverage can often be obtained through your work; keep in mind that this coverage ends when your job does. Or you can purchase an individual policy on your own. Either way, the key is to know before something happens what kind of coverage you have and how much of your income it will cover.
In your 50s? Long-term care insurance
If you are in your 50s, it’s smart to look into long-term care insurance. Historically the most financially challenged people have been older, divorced women, because they have fewer Social Security benefits from often having been out of the workforce and many times do not have a pension. Long-term care insurance is there for you if you need care, so you won’t have to tap into money set aside for your retirement.
To receive more information about any of your policies, contact the experts at Insurance Planning Service today by calling 800-220-8852 or using our online contact form.
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