Fans were thrown a big bomb when news broke on September 20 that Angelina Jolie had filed for divorce from Brad Pitt after being together for 12 years. “Brangelina” started their romance when they were filming Mr. & Mrs. Smith in 2004 and got married in 2014. Some sources stated that their conflict on how to raise their children triggered the bomb while other rumors stated that Brad Pitt was having an affair.
It is believed that this couple made millions since they paired up. Although this divorce battle is over children and not wealth, we would still like to give you a lesson about how divorce can affect your insurance.
1. Life Insurance
Many couples buy joint life insurance after getting married, naming each other as beneficiary. But if you are divorced, don’t forget to change the beneficiary designations on your life insurance policies. The most common way is to change beneficiary from your spouse to parents or children.
Liu bought a million dollar life insurance policy, and named his beloved wife as beneficiary. Unfortunately they got divorced after a few years, but he forgot to review this policy. Liu remarried and had a lovely daughter. One day, he had a fatal accident and passed away. When his wife was submitting a claim with his life insurance policy, she found out his ex-wife had the right to receive the money.
However, in some divorce cases in the States, the court may order the husband to buy term life insurance and insure their children and wife. Because the divorce law in the States requires the person who earns more than his/her spouse to pay alimony – also known in some states as “spousal support” or “maintenance”. Since husbands are usually the “breadwinners” of the family, they may face the court order of paying alimony and children support. The alimony obligation will stop until your ex-wife remarries, your children no longer need a full-time parent at home, or you die.
To ensure the divorced wife and children’s financial security, the court and lawyer often recommend getting term life insurance. For example, if a healthy 35-year-old man who doesn’t smoke buys a 30-year level term policy, he will pay $25 every month to receive a $250,000 death benefit.
2. Homeowners and Auto Insurance
Married couples often get a 10% off discount also known as “Multi-car discount”, and another 20% Multi-policy discount if their auto policy is combined with homeowners policy. The split means losing the discount, which also means that their premium will most likely go up. However there’s a chance that you can get new discounts! Discuss with your insurance agent and find out what discounts they can provide.
Your personal belongings, furniture and electronics are covered in your homeowners insurance policy. You might have insured those valuable paintings, jewelries or luxurious purses, so make sure to re-examine your insurance after divorce.
3. Health Insurance
Ever since Obamacare became effective in 2014, your health insurance premium and the subsidies you can get are bound with your household income and household size. It means a big change on your policy after divorce.
For example, in a household where the husband’s annual income is $50,000 and the wife makes nearly $10,000, it comes out to a total of $60,000. They would qualify for a subsidy. But once they are divorced, the husband will no longer be eligible for subsidy, and the wife can either apply for Medi-Cal or buy insurance though off-exchange.
Another common situation is that the wife is insured under the husband’s group health plan. After divorce, the wife should seek other options within 90 days. You can talk to your agent about whether or not you should buy individual health insurance.
Although getting divorced is a struggle and turmoil in your life, you should review all the insurance policies timely to avoid more financial issues in the future. Insurance companies require a notification of the divorce. Failure to do so may be considered insurance fraud.
In any case, when we buy insurance, we want a lifetime shield for all our loved ones. We wish you a lifetime filled with lots of love and happiness!