Before you divorce, make plans for your insurance needs

Emmet Pierce

Each January, courts around the country see a surge in divorce filings. If ending a marriage is on your list of New Year's resolutions, be aware that your auto, health, home and life insurance needs likely will change along with your marital status.

Minnesota attorney Mark Ohnstad says many couples wait until after Christmas to take on the task of untangling their lives. They often find it easier to move forward in January, when the stress of the holiday season is behind them.

Chicago psychologist Elizabeth Lombardo, author of "A Happy You," says many people find inspiration to start life over at the beginning of a new year. "New Year's is a time when we think, ‘This is my starting point. This is when I make changes. I want to lose weight, quit smoking and get a divorce.'"

Here are some suggestions for your cutting your insurance ties and moving on with your life.

Auto insurance when you end a relationship

When you divorce, you'll likely get a separate car insurance policy, and that could mean losing multipolicy discounts offered for households, says Ron Moore, senior product consultant at MetLife Auto & Home.

The good news is that your relationship isn't the biggest factor in determining premiums. Your insurer will look at your driving record, the amount of time you've been driving, where you live, and the number of miles you log each year behind the wheel. Each factor contributes to your risk of filing an insurance claim.

If you have children who sometimes drive your car, Moore suggests keeping them on your policy, even if they live elsewhere.

"That way, if the child is at your house and takes out your car, they have all the coverage they need," he says. "If they are not on the policy, they become permissive drivers and do not have the same coverage as a household member. It usually is less. Your insurance company assumes that person has another policy and looks to that policy to cover them first. You don't want two companies arguing over who provides coverage."

Health insurance after your separation

When each spouse has access to a group health plan through a job, he or she normally reverts to an employer's coverage after the marriage ends. People who lack employer-provided coverage often lose their health care benefits when they divorce, however.

If you lose health coverage, you may be able to get up to 36 months of COBRA coverage, says Judy Waxman, vice president for health and reproductive rights the National Women's Law Center. Divorce is a qualifying event, so, check your COBRA eligibility. COBRA, a federal law, stands for Consolidated Omnibus Budget Reconciliation Act.

Your children may have coverage through your health insurance policy, your former spouse's or both, depending on your divorce settlement. Try to decide amicably which policy offers the best benefits. If one parent has a plan with employer-provided benefits, it usually makes financial sense to stick with that policy.

Homeowner's and renter's insurance

Homeowner's policies require notification if any information on your policy changes. If you or your spouse relocates, your policy must reflect the change in residence, says David Suarez, senior director of marketing at Mercury Insurance Group.

If one spouse stays in a previously shared residence, he or she normally can maintain the existing homeowner's policy, Suarez says. However, the departing spouse likely will receive only limited coverage for personal belongings at a new residence, depending on the insurer. To be sure he or she is adequately protected, whoever moves away needs to buy separate coverage, he says.

If you become a tenant, be sure to buy a renter's insurance policy. Renters often mistakenly assume that their landlord's home insurance policy will pay to replace their own possessions if there's a loss from theft, fire, flood or some other mishap. It's up to you to find your own coverage.

Revisiting your life insurance needs

After a divorce, you may feel less responsibility for your former partner, but there can be good reason for maintaining an ex-spouse as a life insurance beneficiary.

Someone who pays alimony and child support may use a life policy to make sure his or her former partner and the children they share will be provided for, if the policyholder dies unexpectedly. If you're financially dependent on a former spouse, consider including such a stipulation in your divorce agreement.

Be sure not to forget to update your life insurance policy if you remarry, Ohnstad says. If your ex-spouse remains your beneficiary, he or she will receive the benefits when you die, not your current partner.

Perhaps you have a permanent life insurance policy with cash value. If so, that policy can become a negotiable part of the divorce settlement. Often, one partner will keep the policy and the other will be compensated for it.