During a divorce, strong emotions can cloud the pragmatic considerations that are a crucial part of guaranteeing financial security when it is all over. The added stress of providing a future for the children, as well as settling custodial arrangements and child support, make the path even more difficult.
It is important to remember that the divorce will have an impact on insurance policies and coverages as well. It is better to make health, car and property insurances, as well as beneficiary designations, part of negotiations during divorce proceedings in order to avoid having to rehash these after divorce.
Is insurance part of property division?
Property division in North Carolina is determined by the doctrine of equitable distribution, which means that a judge will decide what is a fair division of marital property based on a number of factors, including the relative financial security or indebtedness of each spouse, length of marriage as well as custody, child support or alimony decisions.
During the divorce proceeding, insurance policies are considered to be marital assets, so the court will look at whose name the policies are under and who are the designated beneficiaries as part of property division. During the settlement negotiations, both parties will have to discuss who will be responsible for continuing property, car and health premiums.
Can I maintain existing policies?
It is possible to maintain coverages of existing policies under some federal laws regulating health insurance. Couples who have long-term policies or policies that are part of a retirement portfolio will most likely need to discuss how these assets will be divided, as well as whether they should continue.
Some types of insurance have accrued cash value, such as life and disability policies. If one spouse prefers to pay the cash surrender value of such a policy as apart of property division, the coverage will most likely be terminated.
Life insurance becomes more expensive as policyholders get older. For older couples, having to purchase a new policy may be difficult. Alternative solutions can include lowering the coverages or requiring a cash value payment by one spouse in the settlement.
When preparing for divorce, it is wise for both sides to purchase additional coverage, add policies or update and transfer beneficiary designations or ownership. If designations are not updated and the insured dies, this can trigger an interpleader lawsuit, in which case the court will decide on the beneficiary award.
For residents of Monroe and throughout North Carolina, it is also important to be able to discuss options that will provide a measure of financial security after divorce.