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Coverage Concerns Divorce and property insurance A vigilant agent can fend off many post-divorce insurance problems By Roy C. McCormick The divorce rate in the United States is reportedly at an all-time high—62%. Although attorneys can be expected to provide sound guidance in certain matters, a divorce decree can result in uninsured property and liability exposures for one or both parties. Most insurance agencies have clients on their books who will contend with these problems. When family insurance agents or brokers are contacted for insurance adjustment by an insured, attorney or mortgage holder, it is important to be well informed on the steps to take for the proper protection of those involved. An insurance counselor/provider should pull out or call up the account file and review it promptly upon learning of the divorce. Several policies will require attention if the agency has looked after the clients’ insurance needs for many years. There well may be two accounts instead of one in the following years. The majority of families have carried a home-owners policy, covering a dwelling and personal property (personal property only if renting) and personal liability insurance, plus an automobile policy. Specialized forms are issued to condominium and cooperative apartment unit owners. When dwelling property is subject to a mortgage loan, the name of the insured in a homeowners policy is generally prescribed by the lending institution to include both husband and wife. When dwelling property is awarded to the wife, for example, the homeowners policy should be endorsed or rewritten as soon as possible to eliminate the name of the former husband. A quitclaim deed or a copy of the decree showing the award is generally required by the mortgagee before it accepts the policy name change or replacement policy. Attorneys routinely take care of that requirement. When the former wife is the only named insured in the homeowners policy, the personal property coverage henceforth protects her personal possessions. It does not cover the former husband’s personal property at his new place of residence. He should arrange new insurance without delay. It is necessary to make coverage adjustments promptly because of various exposures that could be overlooked, including the following: • It is customary to name either the husband or the wife in an automobile policy applicable to a family, even though the other spouse is a driver and may hold title to one of two cars. The other is a named insured by policy definition. This is a convenience that prevents various legal and technical complications. Following the divorce decree, both parties must have their own automobile insurance, applicable to cars titled to them. One may utilize the existing policy, having it endorsed to cover only cars owned by him or her and to show only his name or hers in the declarations as the named insured. The other party must purchase a separate policy for his or her cars. • Many people have rounded out carefully designed property insurance programs by scheduling items of exceptionally valuable personal property. Generally, such property is covered at its full value, based on current appraisal or purchase price, and against risks except as specifically excluded. Classes of valuable personal property for which the amount of protection is limited under basic homeowners policy Coverage C, and confined to named perils, are subjects for scheduling. Whether determined by divorce decree or agreement by the parties, one party will remove certain valuable items from the former joint residence. Each will determine the need for scheduling under his or her property insurance. • Loss experience proves that room-by-room written inventories of personal property (prepared by insureds before a loss) are the best guarantee of sound adjustment. When a homeowners insured suffers a serious property loss, an adjuster promptly furnishes the insured with inventory forms. The adjuster advises the insured that a listing of all destroyed and damaged items is required. The process will be easier to carry out and will be more accurate when the property owner has prepared an inventory in advance. Despite the fact that insurance companies and agencies provide inventory booklets and forms to purchasers of homeowners insurance, many people delay and must be encouraged to take the time. Those who have experienced destructive fire or windstorm understand. Kept in a safe deposit box, a room-by-room inventory of personal property plus pertinent purchase records and appraisals will make it much easier to arrive at a sound adjustment. A photo record of the contents of each room can be a significant contribution—either snapshots or video inventory. Professional services are available for the latter when insureds do not have the necessary equipment. The parent who has been awarded custody of a child has special reason to make certain that homeowners insurance is applicable to his or her residential property. Coverage extends to “relatives” who are members of the same household. A child is included in the definition. Not only does policy protection apply to loss or damage to property but also to third-party claims that can be attributed to the child’s personal activities. The Section II protection is significant for the custodial parent as well as the young person. Individual concerns do not pertain to everyone but are certainly significant for some. Among these is the ownership of vacant land apart from the residential property. It might have been inherited or acquired with the intent of building a house in the future. Personal liability coverage under a homeowners policy extends to vacant land acquired, inherited or rented by an insured. “Vacant” is the key word. The land must be free of buildings or structures of any kind for coverage to apply. In this connection, the value of Coverage II is obvious. These considerations underscore the importance of a well-informed and dedicated insurance agent or broker at the time of clients’ divorce proceedings and problems. * The author |
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