Real Estate & Divorce Blog: How Divorce Alters Your Homeowner’s Insurance

Divorce is a major life change that impacts almost every aspect of your financial and personal life. Among the many things you may need to adjust during this time is your homeowner’s insurance. Whether you’re staying in the marital home, moving to a new property, or sharing custody of a family home, it’s important to understand how divorce can affect your homeowner’s insurance policy and what steps to take to ensure you’re properly covered.

1. Changing the Policyholder

In a divorce, one of the first things you’ll likely need to address is who will remain as the policyholder on the homeowner’s insurance policy. If both spouses were listed on the policy, you’ll need to determine which one will retain ownership of the policy or if it should be updated to reflect new ownership details.

If one spouse moves out of the marital home, they may need to remove themselves from the insurance policy, especially if they no longer have an interest in the property. Conversely, the spouse who stays in the home will likely need to update the policy to reflect their new status as the sole owner or tenant.

2. Removing the Ex-Spouse from the Policy

If your spouse is no longer living in the home or is no longer an owner, it’s essential to remove them from the homeowner’s insurance policy. If you don’t make this change, your ex may still be able to file a claim under the policy in the event of damage or loss, which could cause complications or delays in the claims process. Removing your ex ensures that the policy reflects the current ownership structure.

3. Updating the Homeowner’s Insurance Coverage

During a divorce, you may find that the value of your property has changed, especially if you are selling the marital home or one of you is retaining the property. If one spouse is keeping the house, they’ll need to make sure their coverage adequately reflects the current value of the home, including any changes in renovations, repairs, or assets that were divided.

Additionally, if the divorce settlement includes personal property like furniture, art, or valuables that were once in the home, the insurance policy may need to be updated to reflect any items that are no longer part of the household. In some cases, these items may need to be insured separately.

4. Liability Considerations and Shared Custody Arrangements

If children are involved in the divorce, consider how liability coverage could be impacted. For example, if the children are going to be spending time in both parents’ homes, the homeowner’s insurance should reflect the possibility of accidents or damage while they are in the care of either parent.

If the home is jointly owned but only one party will have physical possession, there may need to be further discussions about liability coverage for situations like accidents, injuries, or damage that may occur when the non-occupying spouse is involved in repairs or property maintenance.

5. Renter’s Insurance for the Non-Owner

If you’re the spouse moving out and renting a new place, consider taking out renter’s insurance to protect your personal property. Homeowner’s insurance typically only covers the structure and contents of the home, not the personal belongings of a tenant. If you’re renting after your divorce, renter’s insurance is essential to cover your personal property and liabilities.

6. Implications for Premiums and Discounts

Divorce can affect your homeowner’s insurance premiums in various ways. If you or your spouse are moving into a new home, the location, type of dwelling, and value of the new property can all impact your rates. Additionally, your eligibility for discounts may change.

For example, if your ex-spouse is no longer on the policy, and they were the primary driver of certain discounts (like multi-policy discounts), you may see an increase in premiums. Conversely, if you are moving into a home that’s more secure (such as one with a security system or fire alarms), your premiums may decrease.

7. Reviewing the Insurance Settlement in the Divorce Agreement

In some cases, homeowner’s insurance can also play a role in the division of assets during a divorce. If the marital home is being sold, the insurance coverage should be adjusted to reflect the sale process. The divorce agreement may outline who will cover the costs of premiums or any adjustments needed before the property is transferred.

8. What Happens If the Property Is Sold?

If you and your spouse decide to sell the marital home as part of the divorce process, homeowner’s insurance coverage will need to be adjusted to reflect the change in ownership. Once the home is sold, the policyholder should cancel the policy and either transfer or purchase a new policy for their new home. Be sure to keep the coverage in place until the home is sold to avoid gaps in coverage during the transition.

9. Working with Your Insurance Agent

During and after a divorce, it’s important to communicate with your insurance agent to make sure all necessary updates are made to your homeowner’s insurance policy. They can help you navigate the changes that need to be made and advise you on coverage options based on your new situation.

Your agent can also provide advice on how to best protect your new property, whether you’re staying in the same home or moving to a different one, and whether any additional coverage (such as flood insurance or umbrella policies) may be necessary.

Conclusion

Divorce can have a significant impact on your homeowner’s insurance, so it’s important to understand the changes you need to make to ensure you’re properly covered. Whether you’re adjusting ownership details, removing an ex-spouse from the policy, or purchasing a new policy after a move, taking the time to review and update your insurance is a critical step in the divorce process. Be sure to consult with your insurance agent to ensure your policy reflects your new living situation and protects your assets during this life transition.

If you need help navigating any aspect of your divorce or real estate situation, feel free to contact us. We’re here to provide the guidance you need to make informed decisions.