Divorce and Insurance Dateline: 03/10/99 As happens from time to time, I read in the paper the other day that one of my insureds, Mr & Mrs. Smith, had filed for divorce. Since the insurance agent is always the last to know, I was not surprised that we had not been informed of the situation. I called the Smith residence and talked to Mr. Smith. He informed me that yes, they were getting a divorce, and that Mrs. Smith had moved out some time ago, and now had her own apartment. I immediately called Mrs. Smith and told her we had a problem. It turns out that the Smith's had not been married very long, and after they got married, they just added Mrs. Smith as a driver on Mr. Smith's policy, and added her vehicle as well. Both the auto and the homeowners policy for this couple were in Mr. Smith's name only. This made Mr. Smith the Named Insured. Mrs. Smith was an insured only because she fell under the definition of an insured, which includes "resident" relatives. While they were married, this arrangement caused no problems. The minute Mrs. Smith moved out, however, a major problem presented itself. She was no longer a resident relative, so she no longer was an "insured" on Mr. Smith's policies. I explained the situation to Mrs. Smith and we immediately wrote a new auto policy and homeowners (renters) policy for her. End of problem? Not quite. Later that morning, Mr. Smith called. My call to him had him thinking about his insurance. He recalled that we had sold him a life insurance policy, and had added his wife to the policy on what is known as a rider. Since Mr. Smith was the Owner of the policy, he alone had the authority to make changes to the policy. He requested that Mrs. Smith be removed from the policy immediately. My next call that day was, of course, to Mrs. Smith. She had just become uninsured for life insurance. We made an appointment to write a new policy the next day. Thinking I had put in a full day, I went to lunch. When I returned, I had a message to call Mr. Jones. Mr. Jones informed me that he and Mrs. Jones had separated, and would be getting a divorce. Mr. Jones had moved out, and taken all of his belongings with him. Mr. & Mrs. Jones had policies that listed both of them as named insureds, so we were not presented with the same problems the Smith's had. I was quick to point out to Mr. Jones, however, that since he was living in a residence "other than the residence premises" (ie: the address on the policy), his personal property was limited to 10% of the coverage listed on the policy. Mr. Jones recognized this as a problem, and agreed to stop by later that day and purchase a renter's policy. We would deal with the auto policy when the divorce was final and the property the couple owned had been legally divided. Mr. and Mrs. Jones each had separate life policies, so those would not be a problem. The moral of the story? If you are an insurance consumer, it is vitally important that you inform your insurance agent of changes in your life such as a divorce or separation. Insurance agents need to recognize the importance of who is a Named Insured. Make it a practice to list both spouses as Named Insured's, and pay attention to who is the Owner of any life policies. If you'd like to discuss the impact divorce or separation have on insurance policies, please stop by the Bulletin Board.
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