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.

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Renters

Have you ever wondered why you need renters insurance? Read more to find out. (Image via Intermedia Images on Flickr)

If you are like the majority of renters in the U.S., you do not currently have a renter’s insurance policy.  In fact, the Insurance Information Institute claims that only about 43% of those who rent their living space have an insurance policy protecting their property.   The reasons so many renters are uninsured vary but there are some common themes.  Some have never really thought about needing a policy that will cover the loss of their property if the place they live is damaged.  Others assume the cost is too high and decide to take the risk rather than obtain a policy.  Another group believes that the insurance their landlord carries on the property also covers their belongings as long as they are in the rental property.

The problem with all of these reasons is that they leave renters exposed to the loss of all their property and no avenue for recovery.  Let’s look at why each reason trades short sighted thinking or misinformation for security.

1.     I Never Really Thought About It

If you are a first time renter, you may fall into this category.  Unfortunately, life doesn’t come with an instruction manual and unless someone points the need for this type of coverage out, you may not realize this is something you need.  Many people never really think about what will happen if there is a fire or a flood and they suddenly lose everything they own.  Many people assume there is some government agency or charitable organization that will help them rebuild their life.  While this may be true, they will help make sure you have clothes on your back, food in your stomach, and a roof over your head but they aren’t going to buy you a new computer, replace your designer wardrobe, or pay to repair the damage to your antique armoire.  If you live in a rental property and do not have insurance to cover your property, call your insurance agent tomorrow for a quote.  Don’t wait until you have to deal with it to do something about it.

2.    I Can’t Afford It

Renter’s insurance generally costs less than $20/month.  If there is a fire and you cannot live in your apartment, are you going to find a hotel that will cost you less than $20/month?  Replacing all your belongings, even if you don’t own anything you consider valuable, is going to cost far more than $20 or $200 or even $2000, which would cover the cost of a renter’s insurance policy for 10 years.  This is an excellent example of being penny wise and pound foolish.

3.    My Landlord has Insurance

While this is very likely to be true it is also very likely that your landlord’s coverage offers you no protection.  Most landlords have a policy that covers the structure and any property they have in the home like appliances.  It doesn’t cover your property or provide you with any liability protection if someone sues you.  If there is a natural disaster like a hurricane or a flood, you will have to bear the full cost of replacing any of your possessions that are damaged or destroyed unless you have a renter’s insurance policy protecting you.

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