Starting over in life can be scary, but with the right insurance, it doesn't have to be.
Divorce is not only painful because of the emotional and physical separation, but because of the immense logistical battle that comes after it. Everything needs to be divided and divided fairly — vehicles, homes, and shared possessions. Divorce has some tricky implications for your car and home insurance policies you might not (or want to) think about. But coming in prepared and well-versed in the finer details of insurance will make the process that much easier. So, as uncomfortable as this might be, let's get to it.
When it comes down to it, divorce is about the splitting of assets in a very legal and permanent way. Fortunately, it’s the same when it comes to car insurance. So, in terms of splitting your policy up, there are some steps you and your former spouse should take in order to make this smooth things along.
Depending on who you’re insured by and who is the policyholder of the policy (i.e., primary insured and the person who created the policy), removing your former spouse from the policy might need to be a team effort. Because many insurance companies won’t allow you to remove your spouse without their consent or proof they are no longer living at the listed residence, you might need your former spouse to speak with your insurance company.
Some companies will allow you to “split” policies in the event of a divorce — almost like cutting the policy down the middle. This, while not commonplace across all companies, allows you to stay with your same company without having to get another policy elsewhere.
Your final and important step to consider is to remove whoever no longer lives at the residence or drives the vehicle from the policy. This is important for many reasons. Within car insurance, a driver is rated based on many individual rating factors (i.e., characteristics). If those rating factors are negative, their premium will be higher as they are seen as more likely to get into an accident or file a claim. By removing that source of risk, you thereby lower your premium. Next, if you have a claims check paid out, a lot of times your insurance company will list both policyholders names on the check. Meaning, you'd have to go through the process with your insurance company of getting check cashed out to you only.
Now that we've talked about more general tips for handing insurance after divorce, let's get to the specifics. After you and your ex decide on what gets what vehicle, you need to think about the vehicle titles. As most insurance companies require that whoever insures the vehicle to be on the title, each person should have the vehicle title solely in their name.
You should consider that your premium will more than likely change — most likely in a positive way as there will be less drivers. Still, you might lose some discounts like multi-vehicle, good driver (if you're a poor driver), or multi-policy. Moreover, insurance companies see married couples as more ideal clients. Historical data tells them married couples are more likely to share driving duties and thus less likely to file a claim. But, as you can see with the data listed below, that premium difference between married and divorced clients is quite small.
And, as we stated, moving from a two person policy to a one person will probably decrease your premium.
National Average Annual Insurance by Marital Status
|Marital Status||Average Annual Premium|
If your kids are not of driving age, you don’t need to worry about car insurance. But if you have split custody and your kids will be driving both your and your former spouse’s vehicles, you need to make some adjustments.
If your kids live with one person the majority of the time, they will need to be added to that policy. If it’s more 50/50, it can get tricky. Typically, whichever parent garages the vehicle most of the time needs to insure the vehicle.
For especially unique situations, it doesn’t hurt to ask your insurance company who should insure your kids.
What to do with your home can be tricky after a divorce. Setting aside the logistical issues of deciding who gets the residence, you need to think about what a divorce means for your liability. Liability coverage within the realm of homeowners and renters insurance is much different than it is for auto insurance. Your personal liability coverage covers you in the event you're found liable for damages; someone is injured on your property, your dog bites someone, or if you cause damages outside of your home. Because this is a pretty useful coverage to have, you and your ex not only want to make sure you have your policy squared away in order to protect your assets but also to protect yourself.
As we stated, if you’re the one who will be remaining in the home, you need to make sure the homeowners or renters policy is in your name — not you and your former spouse’s. In the event of a claims payout, the check will usually say both of your names. This could give you some grief when you try to cash or deposit the check.
If you decide to sell the home because no one will be living in it, simply cancel the policy once the home is in the hands of the new owner and you have another policy established. Remember, your homeowners or renters insurance acts as a protection for your belongings and your liability. So canceling your policy before you have a replacement leaves you vulnerable if you’re found at-fault for some type of accident.
If you're moving out of the residence and your former spouse is staying at the previous residence, you should take the initiative to remove yourself from the former policy once you have a new one. It's important to make sure this is done as any claims that your former spouse would file would impact your insurance record as well if you're still on the policy.
The legal ramifications of marriage and divorce can make the detangling of assets very complicated. And insurance is the same way. It’s important to be upfront with your insurance company and keep your policies clear and concise. Splitting your vehicles up and removing whomever no longer owns or uses the vehicles or residence are great ways to start. If you find yourself needing new car insurance after a divorce, use our insurance calculator to compare rates from hundreds of companies at once.
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