Insurance Considerations Following a Divorce

 By Catherine Powell

Image courtesy Pixabay

As I've pointed out in many blogs, insurance is based on risk.  That risk is based on statistics. When it comes to marriage, there's a 40-50% statistical risk of divorce with a first marriage and a 60-67% risk of divorce with a second marriage.  That being said, if you ever wind up in divorce court, there are a few things you need to know about your existing insurance coverage before you untie that matrimonial knot.  Below is my top-10 list of insurance considerations for divorcees.

#1: Homeowner's Insurance - Who gets the house is one of the biggest decisions every couple inevitably has to make should divorce rear its ugly head.  Should you both decide to sell the family residence, there isn't much you need to do from an insurance perspective until the property is sold unless you both intend on moving out before the sale goes through.  (In that case you'll need a vacancy policy.) However, if either you or your spouse decides to keep the property, you need to contact your insurance agent as soon as the divorce is final.  This will mean providing your insurer with the divorce decree, the deed to the property, and possibly a quit claim deed.  You may also need to adjust your personal property coverage as soon as your spouse moves out when you split your possessions.

#2: Auto Insurance - This one's a bit trickier, since you have a couple of choices to make.  The sooner you part company with your ex on auto insurance, the more it will cost you.  That's because a joint policy is almost always cheaper than a stand-alone policy.  You'll also lose any discount you received for insuring multiple vehicles under one roof.  As long as you both live under the same roof, it's perfectly legal to keep your existing policy in place.  That means if your divorce isn't imminent, you don't have to get your agent to write you a new policy.  As soon as either of you moves out, you'll need to separate your policies.

#3: Health Insurance - If both spouses have their own health coverage, there isn't much you need to do unless there are children in the household.  If you're on your spouse's employer-sponsored health policy, you may be able to elect to receive temporary coverage via COBRA for up to 36-months or until you can find coverage elsewhere.  The reason I say "may" is due to the fact that in some states divorcees aren't permitted to stay on their ex-spouse's health coverage.  If that's the case, they can elect to purchase health insurance through either their employer or healthcare.gov, even if open enrollment is not in effect.  A divorce that causes a spouse to legally lose healthcare coverage is considered a qualifying event that permits enrollment at any time of the year.  Depending on your financial situation post-divorce, you may even qualify for tax credits that could reduce or even eliminate your monthly premiums.

#4: Life Insurance - While it may seem simple to change a beneficiary or drop such coverage after a divorce, there are situations that could justify keeping a policy in place.  If the marriage produced any children, a death benefit could provide your heirs with such things as child support and college tuition if anything untoward were to happen to you or your ex.  

#5: Disability Insurance - While a divorce may seem to throw a monkey wrench in your plans for financial prosperity, so could a debilitating injury.  Whether you have many productive years of work ahead of you or are rapidly nearing retirement when a divorce occurs, before you drop any existing disability coverage you should evaluate your long-term financial goals.  Consider carefully what would happen to you and your family if you or your ex were unable to work. 

#6: Will your insurance costs rise after a divorce? - While the cost of some insurance products will rise and some will drop post divorce, a spouses ability to pay for their own coverage depends largely on their income as well as the distribution of assets set down by the court.

#7: Can insurance coverage be written into a divorce settlement?  - It's quite legal for insurance premiums to be included in a divorce decree as part of a spouse's alimony settlement. 

#8: What about coverage for your kids? - Under whose health insurance will your children be covered? If you have  teenage children with their own cars it will be necessary to decide with whom they will live, where their vehicles will be kept, and under whose policy they will be insured.  

#9: How does a separation affect your insurance coverage? - As soon as either spouse moves out of the family home, you should contact your insurance agent to address your auto coverage.  Factors such as the location of a vehicle and the amount of miles driven to and from work needs to be reported to the insurer to assure coverage. Whoever moves out should also consider obtaining renter's insurance for their own peace of mind since homeowner's policies offers limited coverage to a spouse living in another location.

#10: How soon should you contact your agent regarding a pending divorce? - The longer you wait to inform your agent about a pending divorce, the more difficult it will be to make the necessary changes to your existing policies. Even if you're considering divorce, it wouldn't be a bad idea to touch base with your agent to discuss the particulars.  That way if worse comes to worse you won't have to add insurance considerations to the stress of getting divorced.

Catherine Powell is the owner of A Plus All Florida Insurance in Orange Park, Florida. To find out more about saving money on all your insurance needs, check out her website at http://aplusallfloridainsuranceinc.com