Policy Ownership

Divorce is inevitably a stressful situation that requires a substantial amount of patience. While assets such your home are most likely going to be one of the main considerations to sort out with your ex-spouse, remember not to overlook your insurance policies during the process. There are many different ways that you might have your home insured so carefully consider your individual scenario when reviewing your coverage. You will not only want to involve your future ex-spouse in determining your homeowners insurance needs but also your policy’s provider and possibly your attorney if insurance policies are part of the settlement. The need for different coverage options will change based on whether or not you are separating first, who currently owns the policy, and who will actually be residing in your home post-divorce.

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Changing the Homeowners Policy

Can You Change Your Homeowners Insurance During Separation?

If you and your partner have separated but are not yet divorced, changes cannot be made to the policy unless both parties agree. If you file for legal separation, you will be able to start preliminarily planning how to divvy up your assets and property. If you or your ex-spouse move out during your separation, make sure to notify your insurance company. If you have moved out of the home but your name is still on the deed, you are still liable if an incident were to happen on the property (even if your spouse were to eliminate liability insurance).

Can You Change Your Homeowners Insurance Policy During Divorce?

Changing your homeowners insurance policy during a divorce is dependent on whose name is on the policy. If both of your names are on the policy, both parties will need to consent to any new changes. Since your homeowners policy takes into account your personal property, it is important to update your policy accordingly based on what items in your home you are keeping post-divorce so you are not over or underinsured. It’s also important to make necessary changes to your policy to ensure that appropriate liabilities are maintained during your divorce. Remember that your premiums may change if you have joint policies that include other types of insurance so this may be a good time to look into your other insurance policies that may need to be separated.

For example, you will want to ensure that your automotive insurance is also separated to ensure that your coverage is not affected if your ex were to have a traffic incident because their name is still on the policy. You also may want to look into your life insurance policies. If you have a policy through your employer, remember to update your beneficiaries. If you have a private life insurance plan and are not designated by the court to maintain this policy as part of the settlement, you may want to consider purchasing a new policy. You can find out an estimated cost of what a new policy would be to ensure that you have adequate coverage to reflect the new changes in your life. Remember that taking control of your different insurance policies during divorce protects your assets and your family so it is important to not overlook this during this time.

You’re Staying In The Home

If after your settlement it is decided that you will be staying in the home, you will need to update your homeowners policy to reflect this change. If you and your ex-spouse were joint owners and you are staying in the home, you will want to make sure that your ex’s name is removed from your policy. However, if you and your future ex-spouse will jointly own the home, you should keep your homeowners policy in both names.

Once your spouse moves out of the house, it is important to also adjust your policy accordingly to account for this change. You will want the changes to reflect the new value of the possessions in the house and make sure the coverage is still adequate. Additionally, here are a few considerations to be aware of when updating your policy:

  • Real estate value versus rebuild cost– Real estate value, also known as market value, is the price that you actually paid for your home or the price that your home would be assessed at, specific to your geographic location. Rebuild cost, or replacement cost, is a bit different in the sense that it is the price to build your exact home (same square footage and quality) with today’s current construction costs. When determining your home’s valuation, the insurance company will use the replacement cost valuation.
  • Extended replacement cost– In the event of a total loss, the insurance company will reimburse you based off of the replacement cost of your home, which is typically 100% of your valuation. Extended replacement cost, however, insures your house for anywhere from 125-150% of your replacement cost valuation. Some choose this option to cover the cost of inflation for building materials or to cover an event such as a natural disaster as an added form of protection.
  • Inflation guards– An inflation guard can either be included in your policy or added on as an endorsement. If your house substantially increases in value due to inflation past the point of replacement cost coverage, an inflation guard specifically protects you against having to cover the deficit from your own pocket.

You’re Moving Out

If you are moving out of the home and your ex-spouse is staying in the residence, there are a few different options regarding homeowners insurance depending on where you will be residing after the divorce. If you are going to rent, renters insurance is important to secure and depending on the policy, it can be relatively inexpensive. Renters insurance will protect your possessions and property in the case of theft, fire or other damaging events. You are also covered for anything in storage that may be in transit during the divorce proceedings.

If you are purchasing a new home, you will go through the same process that you did with purchasing your old home to secure a new homeowner’s insurance policy. Sometimes your lender will want you to pay for the entire policy upfront to bring to closing so remember to do your research ahead of time to find the policy that works best for you.

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