Divorce 101: Handling Insurance Before, During and After Divorce

We often find that both parties in divorce are hoping and expecting for a quick divorce once the process begins.  While this would be the ideal circumstance, unfortunately it often is not the reality.  With a plethora of issues needing to be resolved the process may take weeks or months. One aspect of divorce which may not be at the forefront of each parties minds is how to handle their current and future insurance needs.  We’ve outlined the three most important areas below:

1. Home Insurance:
a. Rental Property – It is common in divorce for one spouse to move out of the home, often into an apartment unit as a temporary residence. It is important that a renter’s insurance policy is obtained to ensure coverage over all persona property within the rented home. This will also prevent against any negligence claims.

b. Primary – Although one spouse may have moved out, it is recommended that both spouses remain on the primary home policy until a final decree has been issued. Once a final decree has been issued, and assets have been divided, there are two common ways in which the primary property is handled.

i. If per the decree, it is decided that one spouse will remain in the primary residence, it is extremely important that the house is refinanced in their name ONLY and that the title to the house is updated to their name as well.               This is most important to the other spouse to ensure that they are not liable for any future payments due on this property

ii. If per the decree, it is decided that the house will be sold, the proceeds from the sale of the house will be divided according to the decree.

2. Car Insurance: If the two parties are able to handle the divorce process amicably, it is recommended to leave auto insurance policies in place as is to receive the lowest, multi-vehicle, rate. If the two parties are unable to handle the process amicably, it is recommended both spouses obtain separate insurance policies on their respective vehicles. Regardless of the circumstances, once the decree has been finalized, both parties should obtain separate insurance policies on their respective vehicles. Similar to real estate, it is important to confirm each spouses name has been removed from the other policies to avoid any future obligations.

3. Life Insurance: This is one of the most important, and often overlooked, details during the divorce process. In the unfortunate situation where the payor of support were to pass away, without a life insurance policy on their life, the payee spouse and family would be left with zero support. A life insurance policy should always be put in place on the life of the payor until support is no longer required, at which point the insurance policies should end.

Understanding concepts such as these could play a significant role in your post-divorce future. Hiring an experienced CDFA will ensure a more secure, comfortable future for YOU.  Make sure you sit down with us at Pacific Divorce Management before finalizing your settlement agreement.