Insurance Questions Before the Divorce

The old song, “Love and Marriage” proclaimed that the two went together just like a horse and carriage. The analogy may be as outdated as the claim that love and marriage lasts forever. Anyone who has been through a divorce knows that promises made can be broken. For whatever reason, two people come to the end of a road and take different paths.

If you thought the wedding cost a lot (and it probably did), divorce can come with a hefty price tag as well. Most couples aren’t prepared for the financial stress of divorce. An article in Forbes, “Five Ways Divorce Takes Your Money,” discussed the financial strains of divorce and things that couples should consider before they sign the final decree.

Most couples’ first consideration is just ending the relationship. If there are children, custody is a difficult, if not hotly contested situation. Then deciding who gets the 50” flat screen TV or the wedding china and the rest of the stuff collected over a marriage is the next decision. Everything has a price tag. One party may end up paying child support and/or alimony. If one gets the furniture, the other has to pay to furnish a separate home or apartment.

Depending on the financial situation, one or both parties may have to pay big for legal assistance. According to the article, the average cost of a divorce could be $30,000. The cost of a good attorney may be worth walking away with a hefty settlement. Retirement funds, real estate, business assets—all these things can provide a little security for a new single life. But be careful. Getting the house may seem like a financial windfall, but not if the person can’t afford the mortgage, taxes and upkeep. Instead of being an asset, it can be a burden.

Your attorney may not be the only one cleaning out your wallet. Uncle Sam may get a larger share of your income if your divorce puts you in a higher tax bracket. While most people focus on how much property or money they will take away from the table, they fail to consider what higher taxes will do to their continued earnings. They lack solid financial planning advice from a professional. Like a good attorney, a good accountant can help you avoid expensive tax liability in the future.

Another consideration is insurance needs. Divorce is a life event that will qualify a spouse and children for COBRA continuation coverage. While it’s comforting to know you’ll have insurance, the cost of COBRA can be astronomical. That low-cost employer provided medical plan will cost you 100% of the cost you and your employer pay, plus 2% administrative fees. 

There is also long-term care insurance. Most couples assume that when the time comes, their spouse will take care of them in their old age. Once divorced, you’re on your own. Long-term care insurance can protect you later in life if there isn’t someone around to help should you become disabled and need care. Insurance may be less expensive if couples purchase together, so that may be something to consider before you sign the papers. 

Perhaps someone will come out with divorce insurance—a policy that will cover all the costs and uncertainties of living the single life again. Until that time, individuals need to count the costs and take steps to survive the trauma of a divorce and the financial challenges of paying the price now and later.

Photo Source:  Freestockimages.com / Michal Marcol