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Divorce and finances, part 2: insurance

Modern life involves several types of insurance that are basic building blocks for anyone's household. When that household is divided in half in a divorce proceeding, obviously the insurance part of the equation should therefore receive close attention.

This starts, above all, with health insurance. After all, in the Chicago area and across the country, medical care costs can be astronomically high. And the federal Affordable Care Act (ACA or Obamacare) has not yet fully taken effect.

It's true that, beginning next year, the ACA will require individuals to purchase health insurance or face a financial penalty. Government-run insurance exchanges are to be set up in Illinois and other states. Insurance is to be available through these exchanges even for people with pre-existing conditions.

But those exchanges aren't up and running yet. And the practical reality is that many spouses - especially women - were covered by their former (or soon-to-be former) spouse's health insurance policy through work.

If you are a spouse who will lose coverage under a spouse's policy after divorce, it's important to think about what your options will be for finding insurance. Once Obamacare is operative, that may be your best choice. But the health insurance exchanges mandated by that law are not yet in place.

To be sure, there is already a federal law known as COBRA that allows for continuation of coverage under a spouse's plan for a period of time under certain circumstances. Keep in mind, however, that COBRA premiums are notoriously expensive.

For older people, there is also another type of expensive insurance that may be affected by divorce. That is long-term care insurance. If both spouses see the need to get such coverage, it may make sense to do so, despite an anticipated divorce. This is because insurance companies typically offer discounts on long-term care insurance when both members of a couple purchase it.

Source: "5 Ways Divorce Takes Your Money," Forbes, Kenneth Rapoza, 3-12-13

To learn more about our practice, please visit our page on dividing marital property in a divorce.

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