When going through divorce, when is it the right time to update my insurance?
A divorce is not easy. It can be a challenging and an emotionally draining time. The thought of managing your home, auto, and life insurance during this time may seem like a daunting task, however, it is a vital part of the process to ensure there is no disruption when it comes to protecting your most valuable assets. It can be tricky to know exactly when to start the process. In this article we will introduce you to the 90-day rule and share insurance related tips when it comes to managing your home, auto, and life insurance before, during and after a divorce.
Not sure where to begin? Start with the 90-day rule.
Every insurance contract is different, however, there is insurance policy language that can be limiting in coverage if you or your spouse have been living in separate households for more than 90 days. If you have not taken the steps to tackle your insurance, using this as a benchmark is a good place to start. Together with the help of your attorney, financial planner, and your insurance agent, you can divide and conquer your insurance affairs.
It’s important that you work with someone you trust who is aware of your situation. If you are part of a hostile divorce and are in fear of retaliation, acting sooner than later is recommended. During the process, make certain that you are notified if any claim activity is reported or if any changes are made to your policy.
Once you or your partner moves out, start by contacting your insurance agent or insurance company. Explain the situation. Be prepared to disclose the date of separation or the date the divorce expects to be finalized. Because every situation and insurance carriers are different, your insurance agent will explain the next steps to take, including when you need to separate policies (like on the date of separation, the date the divorce is finalized, or the date the policy expires).
There is an opportunity in divorce for individuals to determine how they want to live moving forward and also of how they want to provide for the children they have together. Insurance is a part of this conversation. Here are some additional tips to consider.
Life insurance
If you have life insurance in place, you will want to consider keeping it in place, with your ex-spouse as the beneficiary, even after the divorce. If you are paying alimony, your ex-spouse might rely on your payments for cost of living and child support. If you delete him or her as beneficiary, you might leave them, and your children, in serious financial turmoil in case of your death. We often see an additional term life insurance policy taken out on both parties as a form of guarantee for this obligation.
If you have no financial obligations to your former spouse, you may want to continue your life insurance but name a new beneficiary, such as the children. You have the option to declare your children to be the beneficiaries of your life insurance but be aware that minors under the age of 18 cannot directly receive life insurance benefits. In case of your death, the money would either be managed by a court-ordered trustee, or the insurance company would hold the benefit until the child turns 18. Our best advice to avoid these options would be to contact a family attorney who can establish a trust and can be named as the beneficiary.
Protect yourself from the possibility of being removed as a life insurance beneficiary. If your spouse owns their own life insurance policy, they could remove you as a beneficiary without your knowledge. You might consider adding a clause to the divorce settlement that the life insurance beneficiary cannot be changed or allowed to lapse without your consent. Work with your divorce attorney to iron out who must maintain life insurance and who owns the policy.
Auto insurance
Determine who will retain which vehicles and notify your insurance agent of the changes. Updating marital status, address, and any other relevant details. If both parties are keeping separate vehicles, you’ll need individual auto policies.
We find that many couples own vehicles that are titled in both spouses’ names. During a divorce, you will need to retitle the vehicles to be in one person’s name. It should be relatively easy to remove one spouse’s name from a vehicle title, assuming you have permission from both parties. Once the new title is received, you will need to go the RMV to complete the transaction and re-register the vehicle in the name of the new owner. If one party is changing their last name during the divorce, then it will make sense to make those changes at the DMV and RMV at the same time.
If you have young drivers in your family, you should ensure that your children are listed on both parents’ auto policies, especially if your kids have access to both parents’ cars. Usually, if a child lives more frequently with one parent, then the child should be covered by the insurance policy of that parent. They should then be listed as a “deferred” driver on the other parents’ insurance policy. By being listed as a deferred, it should not cost additional money just as long as they are listed as a principal or occasional driver on the other policy.
Home and umbrella insurance
Renter’s or Homeowner’s and Umbrella insurance policies should be secured for their new place of residence. The existing homeowner insurance policy will only extend limited personal property coverage to a new residence. Once the divorce is finalized and ownership of the home and belongings have been transferred, you will need to provide written consent to the insurance company signed by both parties to have the home insurance policy updated reflecting the new owner.
Sort, scan, keep and consolidate.
When it comes to your insurance, sort, scan, keep and consolidate. Stay organized and avoid a Lapse in Coverage. This can be devastating and make it much harder and more expensive to find insurance. If you can, we recommend paying your insurance premiums in full as insurance carriers will often surcharge you (in some cases, hundreds of dollars) if you miss a payment.
Lastly, we can’t stress this enough, but work closely with your “team” (divorce attorney, insurance agent and financial advisor) to ensure all insurance matters are addressed in the divorce agreement. This should include clarity on who is responsible for maintaining insurance on all insurance matters including: home, auto, umbrella, health, disability, etc. Clear communication, timely updates, and proper legal documentation will help you manage your insurance program effectively before, during, and after a divorce, protecting your interests and minimizing potential disputes. We are here to help.
Work with us. How NaVella is different:
NaVella was created out of equal parts love and frustration with the insurance industry, its complexities, and the ever-evolving market space. We are on a mission to over deliver and work with the most exclusive high-value insurance carriers in the world.
With more than 17 years of experience in multiple facets of this industry, 1000+ insurance policies analyzed and reviewed, and hundreds of customized insurance portfolios crafted, we are dedicated to giving you control over what and how you protect what you care about most.
We are a woman-owned, progressive, independent insurance agency and consulting firm. We offer personal lines insurance solutions. Our product solutions include insurance for your: Home(s), auto(s), collection(s), Excess + Umbrella, boat, and term life. Our consulting and coaching services serve both personal and corporate clients. Headquartered in Massachusetts, and primarily focused on the Massachusetts and greater New England markets, we can write nationally.
If you’re ready to protect yourself now and in the years to come, please visit us at www.navellains.com, email us at hello@navellains.com, or call us at 617.399.3124.