Do you know how divorce may impact your insurance policies? (image via flickr)

No one likes to think that it will happen to them but with a 50% divorce rate, it is happening to a lot of us.  The last thing you want to think about while you are divvying up your life is insurance, but it should be at the top of your to do list.  In order to ensure you are protected during and after the divorce, you will need to review and make changes to the insurance policies you have individually and together.  Here are 5 of the most common ways getting divorced impacts your insurance.

Policies that Protect Home and Property

These are your homeowner’s policy or your renter’s policy and provide coverage for damage to your home and/or loss or damage to personal property.  Odds are that at least one person is changing residences as a result of the divorce and when they leave, they will be taking property with them.  It is a good idea to reassess your homeowner’s or renter’s policy to ensure you still need all the coverage you have.  For example, if you have a rider that covers an expensive piece of art you may no longer need that rider or to pay for the additional coverage if your former spouse is taking the art.  If you are moving from a home you own to a rented space, you will want to switch your homeowner’s policy for a rental policy.

Policies that Protect Your Cars

There will definitely be changes to your auto policy unless one of you doesn’t drive.  At a minimum, the policy will need to be changed so that it only includes you as an authorized driver.  If you have more than one car, the coverage for any vehicles you no longer own can be removed as well which will save you money.  Don’t wait to make these changes.  As long as you are both listed on the policy, you are both liable for any claims against that policy.

Policies that Cover Your Life

Most people think that one of your first insurance changes you would want to make would be to your life insurance.  You don’t want to take the chance that something happens to you and your former spouse gets your life insurance payout.  However, there are several reasons why you may not want to make any changes to your life insurance as part of the divorce.  First, if you have children, you may want your life insurance proceeds to go to your spouse because they will be the primary caretakers for your children.  Second, if your spouse is paying alimony and child support and something happens to them, life insurance proceeds can help replace that lost resource.  One change you may consider is changing these policies, the ones meant to provide for the care and raising of children, from whole life policies to term policies.  This would enable you to provide means for their care until they are old enough to care for themselves without having to pay premiums for life.

If you are unsure about the insurance implications of your divorce, work with your agent.  They can help you determine what insurance you need going forward and what changes you need to make in order to have the amount of protection that works for you.

Related Articles:

Advertisements
Commercial Auto Policy

Does your job constitute your needing a Commercial Auto Policy? (Image via Can ‘o’ Rye on Flickr)

Do you need a Commercial Auto Policy? This is a question many small business owners ask themselves, their friends, and hopefully their insurance agents.  There is a common misconception that your personal auto policy will cover any losses incurred while driving for the business if you are driving your personal automobile which is covered under your personal auto policy.  This makes a certain kind of sense on the surface.  In essence, you are buying two insurance policies to cover the same exact circumstance, you, driving your car.

Commercial vs. Personal

The main difference between the two types of coverage is how you are using the car.  If you are only using it to drive your family around or to commute to your job, you only need a personal auto policy.  This is true in almost every case, although there are some circumstances where the type of vehicle you own may require you to purchase a commercial auto policy regardless of whether or not you are using it for commercial purposes.  If, however, you are using your vehicle for business activities, you likely need some type of commercial coverage since the majority of personal auto policies exclude losses resulting from business activity.

What Constitutes Business Activity?

This can be a complex question, especially for small business owners.  If you drive your son to school on the way to an appointment with a client, it isn’t always clear which part of the trip is business from an insurance coverage perspective.  The best way to understand what is business activity and what is not is to ask your insurance agent.  If in doubt, assume that anything related to your business requires commercial coverage.

There are some things you can ask yourself that may help you determine if the driving you do would fall under commercial or business activity.

  • Do you deliver anything to customers or clients using your car?  Things like pizza, newspapers, Avon, or any other product that you put in your car and then transport for delivery can be considered commercial activity.
  • Who is driving the vehicle?  If you allow employees or contract workers to drive the car for business purposes, this won’t usually be covered by your personal policy.  Even if you are the only driver, there is a good chance that commercial coverage will be required.
  • Who is riding in the vehicle? If you are using the vehicle to transport other people and getting paid for it, you absolutely need commercial coverage.
  • What percentage of use is personal and what percentage is commercial?  Although this doesn’t always factor into coverage determinations, some insurance companies require commercial coverage if the vehicle is being used primarily for business use.  Check with your agent to see if this applies to your coverage.

The bottom line is that most small businesses cannot afford to take the chance that they have an accident or become liable for damage caused by their car that their personal auto policy carrier refuses to cover.  If there is a question in your mind about whether or not you need to purchase a commercial auto policy, the odds are that you do and you should contact your insurance agent as soon as possible.

Related Articles:

Car Insurance Rates

Do you know what affects your car insurance rates? Image via harry_nl on Flickr

If you have recently gone through the process of reassessing your car insurance policy, you know that it can be a confusing and sometimes frustrating experience.  The difference between one company’s quote and another company’s quote can be minimal or massive and it isn’t always easy to compare apples to apples since companies package their products differently.  Since most companies use complex actuarial formulas to determine their rates and proprietary processes for quoting, you may not ever be able to understand why two policies that seem the same can carry such different price tags.

However, you do have some control over the cost of your car insurance if you understand how your decisions and your actions can impact the rates insurance companies are willing to give you.

Here is an overview of the 7 most important things that can affect your car insurance rate and which you can change to get a better price.

1.     You

Unfortunately, some of the factors that contribute to your auto insurance rates are things about you that you can’t change like your age or gender.   There are some personal details that affect your rates, like where you live and what you do for a job that can change how much you pay for car insurance.  If you are thinking about moving to another town or state, it may be worth it to find out if your insurance rates will be higher or lower in your new location.

2.     Your Car

According to the Insurance Information Institute, the cost of your car insurance is driven in part by the car you drive.  The insurance company looks at things like the original, replacement, and repair costs, safety rating, and prevalence of theft for your car to determine your rate.  This is why it costs more to insure a brand new car even if your driving record and coverage remains the same.

3.     Your Driver Profile

Insurance companies also look at how many miles a day you drive to and from work as part of determining how much your policy will cost.  The more miles you drive, the more likely it is that you will be in an accident and file a claim which makes your rates higher.

4.     Your Driving History

How you drive has a big impact on your car insurance costs.  If you have points on your license from past moving violations, your costs will be higher.  Companies consider your driving history as an indication of how safe a driver you are and safe drivers don’t do things that result in moving violations.

5.     Your Credit History

Depending on the state you live in, your credit history may be a factor in how much you pay for car insurance.  Insurance companies believe that people who are conscientious about their financial affairs are less likely to take risks behind the wheel.  Additionally, actuarial research has shown that how you manage your money can predict how many insurance claims you are likely to file and how big those claims are likely to be, according to the Insurance Information Institute.

6.     Coverage

The coverage you choose including limits, deductibles, and exclusions can have a big impact on the price you are going to pay.  If you choose comprehensive coverage, your costs will be higher.  If you choose a higher deductible, your costs will be lower.

7.     Claims

Your auto claim history is also a factor in how much your insurance will cost.  If you have a history of claims, your rate will be higher as past claims history can be an indicator of the likelihood of future claims.

While there are many factors that affect your car insurance rate that you cannot control, there are some things you can do to keep your cost low.  Drive carefully, stay on top of your credit score, and choose the right coverage for your needs to keep the price you pay for your auto policy as low as possible.


Related Articles:

Homeowners Policy Mistakes

Is your homeowners insurance enough to replace your home and possessions? image via Flickr

Homeowner’s insurance can be the best money you have ever spent if fire destroys your home or a home invader takes some stuff and trashes the rest.  But many homeowners’ make critical mistakes when purchasing their policies that only become apparent after a loss, when it is too late to do anything about them.  Mistakes like these can cost a lot of money and may leave you with an unpaid mortgage, an unusable house, and nowhere to call home.  Make the most of the protection homeowner’s policies offer by avoiding these 5 common mistakes.

1.     Not Reading the Policy Documents

This can be a costly mistake as the policy document outlines exactly what is covered and not covered by the insurance company.  The discussion you have with your agent may leave out important considerations and it is likely that you believe you are covered for things that are not actually covered by your policy.  Before buying a policy, ask the agent for a sample of the policy documents that mirror the policy you are considering.  This will give you the chance to read through the policy and ask any questions you need answered before you are committed.

2.     Not Scheduling High-Value Property

Another very costly mistake that many homeowners make is not scheduling property that falls outside the individual property limits of their policy.  If you are surprised that your policy has limits on specific kinds of property, you haven’t read your policy.  Almost every homeowner policy includes limits on the loss of specific types of property like computers, jewelry, stamps, coins, and firearms.  If the value of your property in that category exceeds the policy limit, you need to ensure that your policy has a rider that will cover the excess value if there is a loss.

3.     Not Understanding the Difference Between Actual Value and Replacement Cost

This mistake can leave you with a mortgage on a house you can’t live in and can’t afford to rebuild.  According to the National Association of Insurance Commissioners Consumers Guide to Home Insurance, actual value will only pay for your loss, which is the value of your house and property at the time of loss and includes considerations for age, wear and tear.  This means that if the value of your house is less than what it would cost to rebuild it, you will have to come up with the difference on your own.  It also means that if the actual value at the time of the loss is determined to be less than your mortgage, you will still owe the mortgage company that difference.  Replacement cost, on the other hand, pays to replace the house and property, regardless of the actual value at the time of loss.

4.     Not Having Coverage for Specific Perils

Many people think that their homeowner’s policy covers damage to their house no matter what causes that damage.  Unfortunately, this is not true on most homeowner’s policies, as any homeowner who has survived a hurricane only to find out that water damage is not covered, can attest.   While it is common knowledge that floods are not covered by homeowner’s insurance, many people don’t understand that flood and water damage are generally considered the same thing.  Unless you live in California, it is unlikely that you know that most policies exclude damage from specific perils like earthquakes, nuclear accidents, and war.  The best way to protect yourself and your property is to understand what your policy covers and purchase additional coverage for perils that could happen but are excluded.

5.     Underestimating Everything

Another costly mistake is underestimating things like how long it would take to rebuild your house, the value of your personal property, or the value of your home.  In the event of a loss, all these can seriously impact your financial well-being.  If your policy only provides for a year of additional living expenses and it takes 18 months to rebuild your house, you will have to pay for the additional 6 months out of pocket.  If you underestimate the value of your personal property, you may be unable to replace what is lost.  If you underestimate the value of your home, you may be saddled with mortgage debt for a house you can’t live in and can’t afford to repair while paying to live somewhere else.

Related Articles: