By Brian Blakely
In a previous post, I had written about taking steps with your personal insurance when it came to the loss of a loved one.
The focus of this post is what starting over and insurance looks like after a divorce.
My hope is to help give some direction for those who know they need to do something, but aren’t sure where to start. There are many different types of insurance policies, but this post will focus on Auto, Home and Renters Insurance, and Life Insurance.
When the divorce is final, it is always a good idea for both parties to take a look at their auto insurance and evaluate what coverage they have. This is also a great time to sit down with an agent and do a policy review. My day to day usually involves working primarily with one spouse when it comes to home and auto insurance. That individual is usually the one to make calls regarding changes, asking about billing questions, and calling in a claim if it is needed.
So, if you were the one that let your then husband or wife handle the insurance, it’s time for you to take a look and see what you have. As much as you may hate to do so, you need to do it. And while you are taking on this challenge, ask yourself these questions…
“Are the liability limits high enough?”
If you review your policy and find out you have the state minimum liability limits (which in Nebraska is $25,000 per person/$50,000 per accident), then you need to evaulate your coverage. If there is a change in your income level because you are going from two incomes to one, there may be a temptation to keep these limits low. But you may be surprised by how much liability coverage you can get, and how little you have to pay for it.
“Do I have physical damage coverage, also know as Collision and Other Than Collision coverage?” (Other Than Collision is also referred to as Comprehensive coverage.)
If that single income thing is a concern, this may be a place where you can make some changes. Simply put, the lower your deductible, the higher the premium. For instance, if you have $250 deductibles for Collision and Other Than Collision coverage, this is the amount you would pay in the event of a claim. By having a $250 deductible, you would pay a higher insurance premium than if you had, say, a $500 deductible. The more you are willing to pay in the event of a claim, the less of a premium you would pay to your insurance company.
But be careful. If you go to a $500, or even a $1,000 deductible to save on premium, you need to make sure you have at least this amount if you ever do have a claim. A lower premium may be great, but not being able to pay your deductible when you need to get your car out of the shop doesn’t make for a great situation when you need to get to work.
“Do you have Roadside Assistance or Rental Reimbursement coverage?” (Rental Reimbursement may also be know as “Loss Of Use”)
Roadside Assistance can come in handy if you lock your keys in your vehicle, need a tow because of a vehicle breakdown, have a flat tire, dead battery, etc. If you don’t already have this coverage, it can usually be added to your auto policy for a minimal charge. If you already have something like a AAA or Good Sam membership, there is no need to pay for double coverage.
Rental Reimbursement coverage is important for those that may only have one vehicle. Essentially, this will pay a certain amount per day for a rental car that is needed due to a Comprehensive or Other Than Collision loss. While coverage will vary from company to company, if you have $30 a day / $900 maximum coverage for Rental Reimbursement, the insurance company will pay up to $30 day for a rental car, with the maximum being $900.
One side note here…for Rental Reimbursement coverage to kick in, it has to be a Collision or Other Than Collision loss (i.e. if you were in a car accident that was your fault, or hit a deer while traveling down the road). If you water pump or timing belt goes bad, your insurance will not help pay for a rental car. Also, if you have liability only coverage (no Collision and Other Than Collision Coverage), then you can not add this coverage to your policy.
Renters / Home Insurance
If a house is involved in the divorce proceedings, there are multiple scenarios that can take place. One spouse may stay in the home while the other finds a new place to live, or they may decide to sell the house and go on to both live in a new place and start a new life.
If a new place is in your future, and you plan on renting a place for a little while until you are ready for a home payment, then renters insurance is a low cost policy that is a must. In fact, it is now being required by a number of property managers that operate large apartment complexes. But even if it is not a requirement, the cost is minimal.
A typical renters insurance policy in Nebraska that would include $20,000 in personal property coverage, with $100,000 liability coverage and a $500 deductible would cost approximately $12-$15 per month. If you get a policy with the same company as your auto insurance, you can take advantage of a lower premium for both with a multi-policy discount. I used $20,000 in coverage because this is the minimum amount for many insurance companies, but from there, you can usually pick your specific coverage amount.
Take Advantage of Discounts When You Can
This is also a good time for you to sit down with your agent and see if you are getting the best rate available to you. If you have an independent insurance agent, they have the ability to shop with many different companies to find you the best rate. This is important because you will most likely be losing discounts on your policy that can effect the rate. The Multi-Policy discount, or Home and Auto Discount, is the one that will make the largest impact on your premium.
After a divorce, dusting off your life policy for a review is a good idea. Even better would be taking some time to call the agent you worked with on the policy to have them give you a refresher course on your coverage.
In many cases, the need for life insurance doesn’t go away after a divorce is final. Assets may change, but if debt was accumulated during the time prior to the divorce becoming official, life insurance can help pay for those debts.
In some cases, a beneficiary change may be in order, but not always.
With the various types of life insurance policies and ways they can be written, I advise to make an appointment with your agent to discuss your specific situation, and make adjustments, if any, based on your needs.
This post is a good place to start, but it doesn’t replace the value of sitting down with an agent and doing a policy review to see what coverages you currently have. When you do this, make sure you get all of your questions answered, and make sure you understand what you have going forward.
Insurance doesn’t need to be something you stress about each day.
But it is important to make sure you have everything in order, just in case you need it.
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