DIVORCED

Since nearly half of all marriages fail, divorce is unfortunately very real for many people. Couples face the difficult task of separating emotionally and financially. This has insurance implications as well. Legal and financial advice will be critical, particularly if there are children involved. Divorce can have a serious impact on one's credit standing, both in terms of dividing joint debt that exists at the time of divorce and expenses that come with starting over. Paying close attention to existing obligations and monitoring credit reports at this time is critically important.

AUTO

A divorced couple will need to decide who gets which car. A change in car ownership will mean a change in insurance. Let your insurance company know about a change of address; who will now be driving the car; and any change in the type or amount of driving that will be done. These details will have an effect on your insurance premium. If someone needs to buy a new car, new insurance will need to be arranged before the car is registered. Removing a former spouse from the insurance policy also protects you from possible liability if they are involved in an accident and get sued.

HOME

Divorce will mean a change of address for one or both parties. The insurer needs to know when there is a change in residence and property coverage. For example, if one party leaves and receives the jewelry in the divorce settlement, the insurer will need to know whether to cancel any special coverage for expensive jewelry. Likewise, if security modifications are made to the home, because one party is now living alone, tell the insurance company. Those security upgrades may qualify for a discounted rate. If moving from a owner occupied home to a rental property, consider getting renter's insurance to cover personal possessions and liability.

LIFE

Many married couples buy life insurance to cover existing and anticipated debts and financial obligations. When a couple divorces, these obligations generally still exist and life insurance should be considered as part of the final divorce decree. Married couples generally list each other as the beneficiary on life insurance policies. Carefully consider any changes. There may be good reasons to continue to keep life insurance on a former spouse.

If the spouse who is providing alimony and child support dies, this may mean a loss of income. Some divorced couples may also consider keeping (or purchasing) life insurance on the spouse who has the primary responsibility for raising the children. If he or she dies, costly childcare will need to be arranged.

The divorce decree should include the funds to pay for this life insurance policy. This way, the spouse receiving alimony can make sure the premiums are paid and he or she is financially protected with life insurance. If a divorced couple is purchasing life insurance to provide financial protection for the children and money is tight, they may want to consider purchasing term coverage rather than whole life. Term is generally cheaper and it is designed to provide protection for a specific period of time.

With Permission © Insurance Information Institute, Inc. - ALL RIGHTS RESERVED -