Untangling your insurance during a separation or divorce
Few things in life are more traumatic than a divorce or separation. That’s why couples often remain together long after the joy has left their relationships. As you untangle your finances to go your separate ways, you likely need to sever insurance ties. Below are tips for dealing with various types of insurance coverage after a breakup.
Auto insurance coverage during a divorce
Breaking up and obtaining separate car insurance policies may mean that you will lose discounts offered for households with multiple policies. Peter Moraga, a spokesperson for the Insurance Information Network of California, says insurance companies generally charge less for people who are married or in a domestic partnership.
"As far as insurers are concerned, there is little difference between married couples and domestic partners," he explains. "If a company has given you a 5 to 10 percent discount, that would be something you lose" through separation.
Marriage is not the major factor in determining car insurance quotes, however. Whether you are single or in a relationship, the three biggest factors will be your driving record, the number of years you have been driving and the number of miles you drive each year. Separating couples have many insurance options.
"A couple can elect to insure cars under one policy, even if they are divorced," says Moraga. "It depends on whether it is an amicable split."
Allstate spokesperson Stephanie Sheppard says the way you divide up your vehicles after a divorce or separation will be important in determining how to proceed with insurance coverage. Allstate typically requires that cars are insured in the names of their registered owners. Remember to shop around for the best car insurance rates.
If you move to another residence, you may get lucky and end up in a community where insurance is less expensive.
"Let's say you move," says Loretta Worters, vice president of communications for the Insurance Information Institute. "You are getting out of Dodge. You car rates may go down if you move to a location that is less costly" because of lower accident or vehicle-theft rates.
Securing home insurance after a separation
If you or your partner moves away, your home insurance policy will need to reflect that. Sheppard explains that home insurance policies typically require notification if any part of the information on your policy is no longer correct. Once a divorce is final, the policy may need to be rewritten to remove a partner who no longer has an insurable interest in the dwelling.
If you or your ex-spouse moves to a rental property following the divorce or separation, it’s probably a good idea to buy renter's insurance to protect that person's personal items and provide them with liability coverage.
Life insurance that makes sense
Couples may decide not to cut all financial ties. Sheppard says there may be good reasons to keep your ex-spouse as a beneficiary on your life insurance policy. For example, if you have children together, you may want to make sure that your life insurance remains current so they are provided for if you die.
However, if you forget to update your life insurance policy when you get remarried or find a new partner, your benefits will go to your ex-spouse if you die.
If the life insurance policy you share with your ex-spouse has cash value, "it is important to think about it in a settlement agreement," says Michael Weintraub, chairman of the Life and Health Insurance Foundation for Education, a nonprofit organization formed to help consumers make insurance decisions."If the value is significant, it becomes negotiable during the divorce. One party generally will keep control of the policy" and the other will be compensated.
When sorting through life insurance issues during a separation, "it is a good idea not to deal with this alone," adds Weintraub. "It is the best time in the world to get advice."
Group health insurance after your separation
Divorce or separation can be scary if you depend on your partner for health insurance. If separating couples each have access to group health plans through work, they normally revert to their own employers’ plans, says Worters.
If you lose your spouse’s group health insurance coverage through divorce or separation, you may be able to get COBRA insurance coverage. Divorce is a qualifying event for such plans. If you are taken off a spouse’s insurance, check your eligibility to buy a COBRA plan. It’s important to know your COBRA rights.
Children may be covered by your health policy, your ex-spouse’s policy or both. Worters says it will depend on the terms laid out in the divorce settlement.