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Insurance and Divorce - Think Carefully
For many folks going through a divorce, I am certain insurance is the last thing they think of but as a New Jersey divorce mediator I say: think again.
For regular readers of this blog, you know that divorce mediation in New Jersey covers four major areas:
But if you read this list closely, no where does it say insurance. So why is insurance so important you ask?
If you're like most of us here in New Jersey, the high cost of living is already pushing you to the limit. Between property taxes, food, transportation and housing costs, living here can be a real drain on anyone's budget. Now you're getting a divorce and suddenly your expenses have shot up. No longer can you enjoy the benefits of co-habitation from a financial perspective as each of you will now be responsible for your own Internet connection, your own car insurance (ever try to insure a car in New Jersey? You need a home equity loan to do it), your own utilities, housing etc. Your costs have in effect nearly doubled because you are no longer sharing a residence with someone else who can also help share in the costs associated with living. Sure there is child support in New Jersey and spousal support / alimony for those who can agree to such an arrangement but what happens at the end of the day when the payor is no longer of this Earth? Will these payments that you need to live on come from beyond the grave or are you one of the lucky ones who happens to be independently wealthy and is not in need of child support or alimony?
If you're like 99.9% of divorcing couples in New Jersey, you need to be prepared for what may unexpectedly come. That's why insurance should be a vital part of your divorce mediation conversation and be specifically outlined in your Memorandum of Understanding (or MOU). For some, insurance can seem like yet another unnecessary expense in the cost of divorce when in fact, it can save you a lot of heartache and strain in the years to come should you ever need it. There are two types of insurance we talk about with clients of Equitable Mediation Services and they are disability insurance and life insurance. Each of these insurance types serves a different purposes but both in my humble opinion are equally important. I know usually as a NJ divorce mediator I don't get an opinion but this time, I'm going to share mine with you.
The first, disability insurance, is specifically designed to cover you should you ever get injured and be unable to work. This type of insurance will provide an income stream for you that you can use to make your support payments such as child support or spousal support and make sure that your children or ex-spouse never goes without should be unable to provide. Now I know what you're thinking "this is great Joe, I already have this through my employer so I'm all set." Think again. Check your benefit amount and see what percentage of your salary it pays. Is it 40%, 60% or if you're lucky 100%? Remember: it's going to be more expensive to live apart that it was together and you will not have anyone helping pay your bills if all of your money has to go for child support or spousal support / alimony. Another thing to keep in mind is that if your MOU does not mandate that you each have disability insurance and one of you gets laid off, there goes the employer insurance benefit. With unemployment rates approaching 10%, will you be one of the 1 in 10 that has no employer sponsored disability insurance? Maybe you are already unemployed and this may be yet another cost for you to carry but think it through carefully. Are you in a high risk occupation that may increase your chances of being injured on the job and being unable to provide for your children or ex-spouse or have a health condition which may do the same?
Which brings us to the second type: life insurance. Now I know what you're thinking on this one. "I am going to leave all my stuff to my kids anyway so if I should die, they'll inherit my estate and they'll be taken care of so no worries here." Think again. Let's just say you get remarried and by some very strange, slim chance, your new spouse did not happen to be as in love with your children as you are. You pass on and now there is a battle for your estate which gets tied up in courts because you either didn't write a will or your will was unclear or out of date. The estate is depleted by the lawyers and justice system and your children are left with no money to either receive their New Jersey child support or pay their college tuition that was promised to them. Now what? I'm not really sure but I wouldn't want to be embroiled in this legal battle which if you read the papers, you know happens every day.
So what should take away from all of this? Involve an insurance professional in your divorce mediation from the start. With some careful planning and honest discussions during your divorce mediation sessions, you can both plan a future that ensures no one becomes an economic victim of divorce.
If the divorce is being filed under one of the seven fault grounds (including extreme cruelty, adultery, abandonment, substance or alcohol addiction, institutionalization, deviant sexual conduct and incarceration), the 18 month separation period, required for a no-fault divorce, is waived. However, each ground for divorce has its own stipulations.
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