Untangling Your Finances When You Divorce: Don’t Forget These Important Details | Part Two | Examine Your Insurance
- September 29, 2021
- By: Roxanne Alexander, CFP®, AIF®, CAIA, ADPA®
Do You Now Have More Home Insurance Than You Need?
Oftentimes, property and casualty policies may be issued in the name of one spouse. This is usually the case with homeowners insurance. If you receive property from a divorce, you should make sure the policy has your name on it in the event of a claim. It would also be prudent to inventory your personal property after the split, as you may be paying a higher premium when you now only need half the coverage.
For example, if you move from a four-bedroom house with $60,000 content coverage to a two-bedroom, you may only need $30,000 worth of coverage. You could also be paying extra for valuables, such as jewelry and art, belonging to your former spouse, so it is important to re-evaluate your policy.
Prepare for Rising Car Insurance Rates
Your car insurance rates may increase. This is due to marriage discounts the insurance companies provide. Being married indicates some stability to the insurance companies and lowers your insurance premiums. You will also have to remove any stacked coverage if you no longer have two or more cars in the household. If your address changes or the “housing” for the car changes, this could also affect your premiums. For example, if your car moves from a secure garage to an outdoor parking spot, this could cause your premium to rise, depending on the carrier.
Life Insurance Issues to Consider
You may have various life insurance policies, maybe some with your employer. Check the beneficiaries to make sure they are in line with your desires. If you want minor children as beneficiaries, you may need to set up trusts. You should also revisit your estate plan with your attorney to make sure your trusts don’t list your former spouse as trustee (unless that is your desire).
It may also make sense to get term insurance coverage on the spouse who pays child support until the children are old enough to sustain themselves. The spouse who receives child support should be the beneficiary of this policy.
How about Health Insurance?
If health insurance is provided by the employer of one of the spouses, how will the other spouse get coverage after the divorce? Are the dependents covered under that policy? This can be a financial hardship if the other spouse has to go and find individual coverage on their own.