Divorce is one of the most emotional and challenging experiences a person can face in life. During the divorce process, couples must make numerous life-altering decisions, from dividing assets to setting up child custody arrangements. Amongst the practical concerns that arise during a divorce, insurance is often a critical point that can make or break your financial stability. It is essential to understand what typically happens to insurance policies during a divorce in Michigan and how to approach the situation moving forward.
Auto Insurance
If there is a vehicle in question that is held jointly between the two spouses, there are a few options available when it comes to auto insurance.
- Option 1: One spouse may opt to purchase the vehicle from the other and insure the auto policy under their name.
- Option 2: If no one convinces the other to purchase the vehicle, a mutual agreement can be made to sell the car and subsequently dissolve the joint policy.
- Option 3: In many cases, one spouse or the other may decide to keep the vehicle and maintain the policy under both names until they are wholly released from the auto loan.
Homeowners Insurance
Michigan is an equitable distribution state. Therefore, any assets that were accumulated during the marriage will be split between the spouses during the divorce. The same applies to the marital home’s insurance policy, which means the policy must be cancelled where both spouses are homeowners.
However, if there is an agreement to allow one spouse to keep the home, the party assuming ownership of the property will have to obtain a new homeowner policy. This policy will only be in their name and will provide coverage needed for the house and personal belongings.
Health Insurance
Health insurance is essential for maintaining physical and mental wellbeing. Typically, an employed spouse acquires health insurance benefits through the employer, which may include coverage for the non-employed spouse.
After the divorce, the non-employed spouse is not entitled to health insurance coverage under the former spouse’s employer plan, and they need to find coverage of their own. In cases where children are involved in the divorce, ensure to check your divorce decree to know who is responsible for the children’s medical expense.
Life Insurance
Life insurance provides financial security for family members, and divorce can impact the future of your coverage. Married couples may have life insurance policies that include the non-employed spouse as a beneficiary.
After the divorce, policies can be changed or terminated. Divorcing couples must take immediate steps to modify their policies to reflect their new reality. You may have to obtain a new life insurance policy or change the beneficiary listed in the policy to reflect the change in marital status.
Conclusion
Divorce affects many critical areas of life, including insurance coverage. Knowing how divorce can affect your policies can help you make the best-informed decisions as you navigate the divorce process. Acquiring legal representation is an essential step in ensuring a smoother transition in your divorce proceedings. An experienced attorney can provide clarity on all unresolved legal issues related to insurance and ensure you take the proper steps to protect your assets. Ultimately, being well informed at this stage can be the difference between financial security and stress.