Many people preparing for a divorce in Chicago, Illinois, know the separation will affect insurance such as health insurance and life insurance. However, many couples overlook the importance of modifying other insurance policies, such as home and auto insurance, both during divorce proceedings and after the settlement. Failing to update these policies can leave spouses exposed to liability and other legal complications.
Ensuring ongoing protection
During divorce proceedings, the spouse who leaves the marital residence must be especially careful to maintain insurance coverage. Many people forget that auto insurance coverage is based on where the car is garaged. If a policyholder fails to update his or her place of residence and has to make a claim, the insurer may deny the claim or cancel the policy. In addition to reporting the new residence, the spouse who moves out should make sure to obtain renters or homeowners insurance.
It is not advisable for spouses who move out to drop any coverage on the marital residence before the divorce is finalized. If an individual legally owns a property and an incident such as property damage or the injury of a guest occurs, the individual may be held financially liable. Absence from the property does not serve as a defense. Once property division is finalized and the house is formally awarded to one spouse, the other spouse can safely drop insurance coverage.
Auto insurance coverage presents another unique issue: typically, one spouse is the primary policyholder. This can put the other spouse at risk of losing coverage. For example, if the primary policyholder stays in the marital residence, the other spouse may lose coverage upon moving out. Many providers also allow the primary policyholder to remove other people from the policy. Spouses who are not primary policyholders should speak with an insurance agent to ensure they maintain coverage throughout the divorce process.
Considerations after divorce
Once divorce proceedings are complete, both individuals can pursue separate policies for car insurance and homeowners or renters insurance. The cost of these policies will likely increase, as discounts for being married and insuring multiple vehicles will no longer apply. If an individual moves to an apartment, the discount for bundling home and auto insurance with the same provider will also be lost. Individuals with lower credit scores than their ex-spouses should also remember that their premiums may increase.
During divorce proceedings, both spouses should make sure to calculate the increased insurance expenses they will face as independent individuals. These expenses should be factored into spousal maintenance calculations to ensure neither spouse is left vulnerable after the divorce settlement.