Insurance for the divorcing couple
January 21st, 2013 by admin
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, 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, replace the policy prior to amending, changing or cancelling 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 would not have liability coverage or any coverage for their belongings. The policy states: “In this policy, ‘you’ and ‘your’ refer to the ‘named insured’ shown in the Declarations and the spouse if a resident of the same household.” When someone moves out, they no longer remain a “you” in the eyes of the policy.
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 reﬂ ect 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 reﬂ ect the owner who will maintain possession of that vehicle. A co-owner not living in the same household also would need to be listed as an additional insured.
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 whose policy will they be listed on. h is 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 not be too happy when it’s his policy that has to pay out. It’s not good for mom if dad has minimal limits or, even worse, lets 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 reﬂ ects the children’s legal address.
Does it matter which spouse requests the changes?
It would be great if the separating couples can do this amiably, 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—you can’t. What if the remaining spouse was never listed as a named insured on the auto policy, they will not be able to make any changes since they are not considered the “named insured”. It is diﬀ erent for a homeowners policy. A spouse, who was not listed on the policy, still has the right to cancel the policy. h e policy deﬁ nes 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 aﬀ ected, 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 it 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 (ﬂ oater) policies that may be attached to the homeowners policy, they will need to be reviewed. A scheduled item policy is a policy where typically highvalued 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. Divorce can put a lot of pressure on people and you could possibly overlook important details. Don’t let your insurance protection suﬀer. Be sure to contact our agency to discuss your insurance coverages.