Protecting Children Against Future Risks
Janene Baedke, Extension Educator; Sharon M. Danes and Jean W. Bauer, Extension Specialists and Professors — Family Social Science; Kathleen Lovett, Extension Educator; Kathryn D. Retting, Professor — Family Social Science; and Patricia Stumme, Extension Educator
Divorced parents with custody of children can get health insurance for them through their employment-related insurance program, according to a federal law adopted as part of the Consolidated Omnibus Budget Reconciliation Act (COBRA).
Under COBRA, divorced spouses of employed medical plan participants can pay for their own coverage for up to 36 months after the divorce. The premiums you pay can be costly, so check the costs of other health plans before deciding to continue coverage through your ex-spouse’s employer.
Having health insurance for children is important. If you will be the custodial parent, don’t overlook these expenses during your divorce negotiations. Usually, if one parent has employer sponsored health coverage, he or she maintains the children on that plan.
When comparing insurance plan costs, restrictions, and coverage, it’s helpful to consider the following before consenting to any arrangement under the other parent’s plan:
- Are doctors currently treating your children within the plan’s network?
- Are dental or optical expenses included? If so, what percentage is paid?
Children cannot be denied coverage by a noncustodial parent, the parent’s employer, or parent’s insurance company based on any of the following reasons:
- The child lives outside of the plan’s service area.
- The child does not live with the noncustodial parent.
- The child is not claimed as a dependent on the noncustodial parent’s federal income tax return.
Be sure to investigate any possible laws in your state that provide health insurance for children who are not covered by any source. For more information, go to the Insure Kids Now website. For more information on COBRA, visit Continuation of Health Coverage: COBRA on the United States Department of Labor Website.
As you gather information about life insurance policies, it is important that you understand certain common terms that are critical in the divorce process:
- Insured: This is the person on whom death benefits will be paid. The policy will state the name of the insured.
- Policy Owner: This is the person who pays the premium, names the beneficiaries, and can cancel the policy. This person has control over the policy. The person to whom the bill addressed is the owner. The policy states the name of the owner.
- Beneficiary: This is the person(s) who receives the benefits upon the death of the insured. His or her name is listed on the policy.
- Face value: This is the amount of money that will be paid to the beneficiaries upon the death of the insured.
- Cash value: Cash value is the amount of money the owner of the policy would receive if the policy were canceled before the death of the insured. Typically, whole life insurance has cash value and term policies do not. Cash value may be used as collateral for loans. Loans reduce the death benefit of the policy, so be sure there are no loans against the cash value of those types of policies.
When you divorce, you need to reconsider who should be named the beneficiary of any life insurance policies. Don’t automatically remove your spouse from your policy, however. You may be prohibited from doing so until after your divorce is final. You may also want to keep your soon-to-be-ex-spouse as the beneficiary of your policy if your spouse will need a lump sum of cash to help care for your minor children should you die before they reach adulthood.
Your income could be placed at risk if you or your ex-spouse who is paying child support becomes disabled. Disability insurance will protect some of your income should you become unable to work due to illness or injury. If you become disabled, the policy will pay you a certain percentage of income, which will help you pay everyday living expenses to care for your children.
Check to see what type of disability coverage is available to you. You may hesitate to buy disability insurance due to the expense and your perceived lack of need. Consider the harsher reality your children would face, however, if you or the other parent became disabled and unable to work.
Use the worksheet Summary of Insurance Policies (56 K PDF) to help track information about each of your insurance policies.
Danes, S. M. (2009). Planning ahead for retirement. St. Paul, MN: University of Minnesota Extension.
Danes, S. M. & Stumme, P. (2001). Adjusting to suddenly reduced income (9.87 MB PDF). St. Paul, MN: University of Minnesota Extension.
United States Department of Labor. (n.d). Continuation of health coverage — COBRA.
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