After a fire, a divorced homeowner who kept the family home discovered the insurance policy for her beautifully renovated home was still tied to its original, unrenovated value, leaving her with a crippling financial shortfall.
Most people don’t realize how vulnerable they are to insurance violations during divorce. There are ways to protect yourself from these surprises while optimizing decisions that can save you thousands.
Health Insurance Decisions Can Affect Everything Else
People going through divorce get overwhelmed by big financial questions. How much money will I have? What about college for the kids? Insurance feels like something you’ll handle later.
Your health insurance choice can shape every other financial decision you’ll make post-divorce.
The standard advice is simple. Choose between COBRA or getting your own insurance. Most people assume COBRA costs more. They shop for individual plans with high deductibles.
Traditional divorce planning gets this wrong. What matters is your total out-of-pocket cost when you need care.
What actually drives your costs:
- Current medications
- Ongoing therapy sessions
- Specialist appointments
- Deductible differences
- Network restrictions
We work with people who face this choice regularly. In our experience, the math can surprise them. COBRA might cost more upfront, but it sometimes saves money when you factor in actual usage.
The Insurance Violations Hiding in Plain Sight
Most people don’t know this: during divorce proceedings, automatic temporary restraining orders (ATROs) prevent either spouse from making changes to insurance policies.
What you cannot change during divorce:
- Health insurance coverage
- Life insurance beneficiaries
- Annuity designations
- Retirement account beneficiaries
People violate these orders constantly. The consequences can be severe.
I had one client whose husband took her off his health insurance during their divorce. She was later diagnosed with cancer. Since he’d violated the ATRO by removing her coverage, he became financially responsible for her entire treatment. The medical bills were astronomical.
When someone asks us to review their divorce situation, we often look for these violations early. Not because we’re looking for fights, but because catching them may prevent bigger problems later. Insurance violations during divorce can create financial challenges that take years to resolve.
Finding Hidden Long-Term Care Coverage
Divorce usually happens when people are older. Many have medications, existing health conditions, or are starting to think about aging parents. The question becomes: what happens if you need long-term care down the road?
Long-term care insurance is expensive when you buy it individually. Your spouse might have group long-term care coverage through their employer that you can continue.
We’ve found this buried in benefits packages more than once. When it exists, it’s often portable at group rates that are much lower than individual coverage.
This requires detective work. We dig through all the benefits documentation, looking for coverage that might transfer. For someone facing single life after divorce, having affordable long-term care protection provides real peace of mind.
Why “Umbrella” Insurance Becomes Critical After Divorce
When you’re married, you have shared assets and shared liability. After divorce, you’re on your own financially. This may make you a different kind of target.
California is extremely litigious. If someone gets hurt and decides to sue, they’ll Google you to see if there’s money to go after. If you have a high-profile job or visible assets, umbrella insurance protects your net worth from lawsuits.
The coverage isn’t expensive. Many people skip it because they don’t understand the risk. After divorce, when all your assets are in your name alone, that protection may become much more important.
We review all insurance coverage during divorce. Not just health and life insurance. Homeowners, auto, umbrella coverage, everything needs evaluation for your new situation.
Getting the Insurance Analysis Right
Divorce attorneys focus on legal issues. Financial planners focus on planning and clients’ financial future after divorce. Insurance often gets overlooked, yet it affects everything else you’re trying to accomplish.
Insurance types we review with clients who are going through divorce:
- Health coverage
- Life insurance
- Disability protection
- Homeowners policies
- Auto insurance
- Umbrella coverage
When someone’s going through divorce, professionals often pace them through insurance decisions so they don’t feel overwhelmed. There’s already enough chaos without trying to figure out COBRA elections and beneficiary changes all at once.
Understanding what each policy actually covers and what it costs in real life requires careful analysis. We look at the fine print, deductibles and out-of-pocket maximums, and what happens if you need care.
Taking Care of the Details That Matter
We’ve learned this working with people through divorce: the details often matter more than the big decisions.
Everyone focuses on dividing assets and determining spousal support. If your insurance isn’t set up correctly, those careful financial plans may be impacted negatively.
Our team helps clients think through insurance implications while they still have time to make good decisions. Not just the obvious coverage, but the hidden benefits that might transfer, the legal requirements they need to follow, and the coverage gaps they might need to fill.
Our goal is helping ensure you feel protected and prepared for whatever comes next. When you’re rebuilding your financial life after divorce, the last thing you want is an insurance surprise derailing your progress.
Some clients have told us they wish they’d thought about this stuff earlier in their divorce process. In their experience, they spent months negotiating asset splits but rushed through insurance decisions at the last minute. Those hasty choices sometimes can cost them a significant amount of money and peace of mind.
When insurance planning goes right, it supports everything else you’re building. When it goes wrong, it takes a lot of work and effort to change it.
Next Steps
If you or someone you know is going through a divorce and wondering about your insurance options, we understand how overwhelming this feels. These decisions are not simple. They require thoughtful planning and understanding all the details.
If you’re a current client, reach out to your Team Hewins advisors for help navigating insurance decisions during your divorce. We’re here to support you through this transition.
If you’re new to learning about Team Hewins, we welcome you to check out our “Big Decision Clarity” meeting. It’s designed for people who want to make sure they’re protected during major life transitions.
We’ll review your specific situation and help you understand your options before you have to make any final decisions.
Learn more here.
Team Hewins, LLC (“Team Hewins”) is an SEC-registered investment adviser; however, such registration does not imply a certain level of skill or training, and no inference to the contrary should be made. We provide this information with the understanding that we are not engaged in rendering legal, accounting, or tax services. We recommend that all investors seek out the services of competent professionals in any of the aforementioned areas. Certain information provided herein is based on third-party sources, which information, although believed to be accurate, has not been independently verified by Team Hewins. Team Hewins assumes no liability for errors and omissions in the information contained herein.