Although divorce serves to sever ties, when your agreement includes alimony payment, you remain financially united… in wealth and poverty.
Most divorcing couples focus on dividing up assets and negotiating support, but they often overlook one of the essential elements of life after divorce: insurance.
Whether you are the beneficiary or payer of a pension or just starting a new life on your own, it is essential to check that your insurance cover is sufficient. Why? First, ask yourself these four questions:
- What if your ex-spouse dies ─ or if you die?
Yes, life insurance is an integral part of family financial planning, but it also matters regarding divorce. If you’re dependent on child support, could you get away with it if your ex-spouse died and the payments stopped? If you pay the pension, do you know that your obligations do not necessarily end when you die? Without special provisions to ensure future payments, your heirs could have their hands tied for a very long time. Ensure that the ex-spouse who pays the support has a life insurance contract of which the other ex-spouse is the beneficiary to cover the support payments for the ex-spouse or children. Even consider including this in your separation agreement; with your lawyers, make sure that this beneficiary designation is signed at the same time as the separation agreement to avoid oversights. And make the beneficiary designation irrevocable so it won’t be changed later. To make sure everything is done correctly, consult an independent legal advisor.
The amount of life insurance needed depends on the size of the pension paid and the age of the children or the stage of life they are at. If the children are young, it may be wise to cover more than the pension payments. The amount of insurance should consider significant expenses related to long-term child care, including savings for education.
- What if one of you becomes too sick to work?
Whichever ex-spouse pays support, they must also cover their expenses. The disability insurance offered by his plan at work may not be enough to cover everyone’s needs. For the good of both parties, it may be a good idea to take out additional disability insurance if an accident or illness prevents one of the two ex-spouses from working.
If one of the ex-spouses stays home to take care of the children, disability insurance remains essential to make ends meet. In case of illness or accident, someone is needed to take care of the children. Disability insurance coverage ensures that you have enough to pay this person.
- How will you cover unforeseen medical expenses?
If you have always used your ex-spouse’s insurance plan alone or combined with your plan at work, some of your insurance needs need to be reviewed. Consider getting extended health insurance to cover significant expenses that are not covered by your provincial health insurance plan or that your project (if you have one) may not sufficiently cover. Another coverage that you could easily overlook if you’ve had it for several years is overseas travel medical insurance. In the absence of coverage offered by a plan at work, you will now have to take out your insurance when you travel. Be sure to include this cost in your travel budget to be well protected if you fall ill or have an accident abroad. - Are your home and auto insurance in your name?
Did you buy a new house or a new car? Have you had the title deed of your house and the certificate of ownership or the long-term rental contract for your vehicle put in your name alone? If you’ve never had home or auto insurance before, you’ll need to get some right away. It will be essential to verify that the name on your insurance contracts is the same as the one that appears on your title deed and the certificate of ownership or the long-term rental agreement for your car.
Now that you’re single again, your insurance needs are changing. Review your insurance contracts carefully to ensure you have the coverage you need.
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