Divorce and Insurance: Who Gets What Affects Your Coverage
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Divorce and Insurance: Who Gets What Affects Your Coverage Loretta Worters, Insurance Information Institute Whether you’re Eva Longoria and NBA star Tony Parker, Elizabeth Hurley and Arun Nayar, or Jane and John Doe, the transition through separation and divorce is not only emotionally difficult but…
Whether you’re Eva Longoria and NBA star Tony Parker, Elizabeth Hurley and Arun Nayar, or Jane and John Doe, the transition through separation and divorce is not only emotionally difficult but also fiscally difficult, and insurance is part of that equation. Divorce can also have a serious impact on a couple’s credit standing—both in terms of having to divide joint debt that exists at the time of the divorce and having to cover expenses that come with starting a new life.
A separated or divorced couple needs to decide who gets the car. Whoever owns the car will also need to be the one named in the insurance policy. If your ex-spouse retains the car, make sure to have your name removed from the policy. This will protect you from possible liability if your former spouse is involved in an accident and gets sued.
If you or your former spouse buys a new car, arrange for a new auto policy, in the owner’s name only, before the car is registered.
In the case of a separation, make sure your insurance company has your updated contact information, especially if your spouse is paying the insurance bills, so you can be notified if he or she is in arrears. You don’t want to find out after an accident that your coverage was cancelled for lack of payment.
Homeowner’s and Renter’s Insurance
If you are the one staying in the house after a divorce, review your current policy coverage to determine if it’s still appropriate, and put the policy in your name. If you are moving out and into an apartment, you still need insurance to protect your personal possessions.
In most divorces, possessions are split between the parties. If you have an existing home inventory, it should be updated. If you don’t have an inventory, it’s a good time to create one. To make this task easier, you can use the free online home inventory software available at www.KnowYourStuff.org.
Take note that if one party receives valuable jewelry, art, or other luxury items in the settlement, the insurer will need to be informed whether to add any special floaters or endorsements to the policy for these items (or cancel them in the case of the party who does not receive them).
There may be good reasons to keep life insurance coverage on a former spouse. If one party is providing alimony and child support to the other and he or she dies, it may mean a loss of income to the surviving party. Some divorced couples may also consider keeping (or purchasing) life insurance on the spouse who has the primary responsibility for raising the children.
Many people own life insurance because they are aware of the risk of dying; however, most people ignore the risk of disability. If a former spouse becomes disabled and cannot work, it could threaten alimony and child support payments.
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