Insurance and prenups? How on earth are those two things connected? It’s simple: health insurance and life insurance clauses can be written into your prenup if you want. These can be very important and useful clauses, especially for folks with any ongoing health issues for health insurance and any high-risk jobs for life insurance. Even if you are in perfect health and have a low-risk job, including health and life insurance into your prenup can be beneficial! Keep reading to learn about the impact of a prenup on insurance coverage.
What is a prenup?
A prenuptial agreement, sometimes called a prenup, a premarital agreement, or an antenuptial agreement is a contract between a couple who are about to get married. A prenup must be completed before the wedding; otherwise, it won’t be a valid prenup. Prenups can cover financial and non-financial topics in the event of a divorce and during the marriage. Yes, prenups handle more than just divorce topics, but also marital topics, like if you two will have a joint bank account or not. Other topics a prenup may cover include property division, alimony (i.e., spousal support), and debt assignment. That’s not all; there are tons of other clauses you can add to your prenup, like infidelity clauses and sunset clauses.
Prenuptial agreements are also as much of an emotional document as they are a legal document. Say what?! That’s right; prenups can actually strengthen relationships by setting expectations for one another, aligning on life and financial goals, and establishing marital roles. The process of getting a prenup facilitates in-depth communication that you may not have experienced in your relationship yet. The topics you have to dig deep on are tough: marriage, death, divorce, money, children, and more. There’s no skimping on these conversations; you need to be aligned on every last provision of your contract, and to do so, communication is required. See? Prenups are actually kind of romantic if you think about it in a relationship-building way!
How does a prenup work?
A prenup is a legal document to which you and your partner create and agree. As long as your prenup is valid and enforceable, you and your partner will be bound to the terms of the prenup. If you say you will do X, Y, and Z, then you, legally, must do those things.
If you never get divorced, you may never have to “use” your prenup, which is great! That’s the goal. However, if the time ever comes and you need to invoke your prenup, you can do so either privately or through the court. By “privately,” we mean you and your spouse can abide by the terms of the contract between yourselves (and probably with the help of your divorce attorneys). By “through the court,” we mean you may need to ask a family court to enforce the prenup. As long as the court finds your prenup valid and enforceable, your terms will be legally binding, and you must follow them.
The impact of a prenup on life insurance
Life insurance is the policy you take out to insure your life and provide for your family in your death. With a life insurance policy, you have a death benefit which is the amount of money your beneficiary will get if you die. Your beneficiary can be anyone of your choosing, but many people will have it be their spouse or children.
What does all of this have to do with a prenup, you ask? Well, you can include a life insurance clause in your prenup. The clause may dictate your spouse as the beneficiary for a set death benefit amount. For example, it might say something along the lines of, “Spouse A must have a life insurance policy with Spouse B as the beneficiary for a death benefit of $100,000.” Typically, this will only apply for the duration of the marriage. In other words, if you get a divorce, you will no longer be the beneficiary of your ex-spouse’s life insurance policy.
Why would someone want to include this? It could be for many different reasons. Many times, people want to have a life insurance policy in place to be able to cover funeral expenses and medical bills. Perhaps it’s because one of the spouses has a high-risk job, like the military, and the other spouse wants reassurance that they’ll be taken care of in the event of death.
The impact a life insurance clause in your prenup has on your life boils down to one thing: you and your spouse are legally required to maintain life insurance with the other as the beneficiary for the set amount.
The impact of a prenup on health insurance
As you probably know, health insurance is the policy you take out to insure your health and cover medical costs. You may be wondering what happens to your health insurance in the event of a divorce if you are relying on your spouse’s insurance. With a prenup, you can dictate exactly that. There are a few ways you can handle this in a prenup. One, you can require the person providing health insurance to continue providing health insurance as long as the insurance plan allows for it. Two, you can say neither person will be required to provide health insurance for the other. Or three, leave it up to a court to make that decision for you in the event of a divorce.
For example, let’s say Joanne and Thomas are getting married soon and are writing out their prenup. Joanne is a stay-at-home mom, and Thomas is the provider, who also provides health insurance through his employer. Joanne has an autoimmune disease and worries that she would be in trouble if they got divorced because she wouldn’t have health insurance to help pay for her medications and doctor appointments. That is why she negotiates in her prenup to have Thomas continue providing her health insurance even in the event of a divorce (as long as the insurance provider allows for this). Thomas agrees to this, and they sign their prenup and live happily ever after! Joanne’s mind is at ease knowing that her health is taken care of, even in the event of a divorce.
The Bottom Line
The impact of a prenup on insurance coverage comes down to what you make of it. If you want to include clauses about health and life insurance, then the impact will be what you wrote. For example, if you say you want your spouse to have a $1,000,000 life insurance policy for your benefit, then that is the expectation. Of course, you two have to negotiate and come to an agreement on this; it’s not like one spouse can demand it, and the other has to obey.
If you have a health condition and would feel more secure by including a clause that says your spouse who provides health insurance must continue providing health insurance, even in a divorce, then by all means! As long as your spouse agrees, you two can make these calls.
HelloPrenup can help you with life insurance and health insurance clauses (or neither if you don’t want them!). With our interactive, intuitive platform and tons of resources at your fingertips, we can help you make this decision and ultimately create a legally sound prenup with or without insurance obligations.
Nicole Sheehey is the Head of Legal Content at HelloPrenup, and an Illinois licensed attorney. She has a wealth of knowledge and experience when it comes to prenuptial agreements. Nicole has Juris Doctor from John Marshall Law School. She has a deep understanding of the legal and financial implications of prenuptial agreements, and enjoys writing and collaborating with other attorneys on the nuances of the law. Nicole is passionate about helping couples locate the information they need when it comes to prenuptial agreements. You can reach Nicole here: [email protected]