Insurance and The Divorcing Couple
According to various studies on American divorce rates, more than 40 percent of marriages end in divorce or annulments. If you and your spouse are going through a similar circumstance, we would like to share with you some commonly asked questions that will assist you in dealing with your homeowners and auto insurance policies.
My spouse has left the household and we are getting a divorce. What happens to the coverage on our homeowners and auto policies?
If someone moves out, the appropriate coverages will not remain in place. With the auto policy, there will be new garaging information, a change in driver information and different to/from work mileage, among other changes. A new auto policy will need to be obtained by the person moving out. To ensure that there is no lapse in coverage or that one of the individuals does not go without insurance, purchase the new policy prior to amending, changing or canceling the old policy.
It is in the best interest of the person moving out to obtain their own homeowners or renters policy. This way, proper liability and personal property coverage will be afforded to them. If they do not get their own coverage, they may not have liability coverage or any coverage for their belongings.
What should be done with the current policies in place?
The auto policy for the spouse remaining in the home can be maintained; however, it must be changed to reflect the removal of the relocating individual and their vehicle. Also, insurance companies require the person insuring a vehicle to be on the title. If the vehicles were all titled in one name, they must be changed to reflect the owner who will maintain possession of that vehicle.
The homeowners policy for the spouse remaining in the home can be maintained. However, for the relocating individual who has moved out and is still on the deed, they will need to be named as an additional insured.
What about coverage for our children?
When teen-aged drivers with their own vehicles are involved, it is important to identify where they will live, where the cars will be insured and on whose policy they will be listed. This should be the same for all children who were residence of the household at the time of the parents’ split; otherwise problems will arise in the ratings (premiums) and possible coverage with the policies. What happens if son or daughter lives with mom, but their cars are on dad’s policy? Dad may have minimal limits or, even worse, he may have let the auto insurance policy lapse.
It is important to identify the permanent or legal address for the children. Items of any value that were scheduled will have to be scheduled again, but on the appropriate insurance policy that reflects the children’s legal address.
Does it matter which spouse requests the changes?
It would be great if the separating couples could do this amicably, but that is not always the case. However, it must be noted that just because one moves out, it does not mean that the other can just go ahead and remove them or change the policy. Only a named insured is authorized to request changes and these should be consistent with the separation or divorce agreement.
It is different for a homeowners policy. A spouse, who was not listed on the policy, still has the right to cancel the policy. The policy defines a resident spouse as a “named insured,” thereby allowing them the authority to make changes, amend or cancel the policy
Will the policy premiums be affected?
Expect your insurance premiums to increase. Many companies give discounts to married couples and when you get divorced, you will lose that discount. Also, if you have separated out the cars during the divorce, you also can lose a multi-car discount and/or multi-policy discount, which can provide additional savings off your premiums.
There should be no impact to the homeowners premiums. With that being said, however, if both spouses keep a car, both would be eligible for a multi-policy discount. Also, depending on how the divorce works out, the credit scores, or financial scores, of both parties could be affected. If the scores are affected, it may have an impact; however, it would not have an impact on a policy already in place, only on a new homeowners policy.
Are other policies impacted by separation and divorce?
Yes. If you and your previous spouse had an umbrella policy, you will need to review and update it to address any underlying policies and make the necessary changes to reflect the current conditions. Also, if there are any scheduled item (floater) policies that may be attached to the homeowners policy, they will need to be reviewed. A scheduled item policy is a policy where typically high-valued golf clubs, electronics or jewelry, etc., are insured separately. If there is a division of property when the couple divorces, you will want to ensure that those items are accounted for and insured properly with the appropriate spousal policy.