2 Big Insurance Changes When Households Break Up

Cultural norms change over time and new considerations arise that our parents and grandparents possibly never imagined. One of those is that of couples and families separating and divorcing. In addition to being a big life event and change, this also has the potential to create gaps in insurance coverage and protection. Because insurance is dictated by definitions, the “definitions” need to be reassessed when family arrangements change. This means insurance changes when households break up.

2 Major Insurance Changes When Households Break Up

There are two primary areas that are affected and need prompt consideration. The first is Personal Property and Personal Liability, and the second is Auto Insurance.

1. Personal Property and Personal Liability

To begin, what needs to be reviewed and adjusted as relating to Personal Property and Personal Liability?

Personal Property Under One Roof is Considered Co-Owned

When a couple is living together under one roof, all of their personal property is considered co-owned. Even if the insurance policy Declarations page (DEC Page) only lists one of the spouses, the other spouse is automatically insured since “resident relatives” within the same household are considered insured. This applies to both property and personal liability.

You Need to be Listed on the DEC Page to Retain Coverage

But, now the situation changes and one of the spouses moves out. Let’s assume that the spouse that moves out is the one that is not listed on the DEC Page of the policy.

Immediately, that spouse no longer has coverage on any personal property they may have in their new apartment or dwelling. They also do not have any liability protection afforded to them from the Homeowner policy. This is an instant gap in protection.

However, if both names are on the DEC, such as Jane and John Jones, then if John moves out, he would still have coverage for liability and some personal property. That is the reason we always suggest having both names listed on the DEC page of the homeowner policy.

Cohabitations Require Both Names on the DEC Page for Full Coverage

A small side note, if two individuals are cohabitating and not legally married, then for both parties to be protected properly each must be listed on the DEC page of the policy. Many insurance companies are now allowing this.

2. Personal Auto Insurance

The other area of personal insurance directly affected is Personal Auto. This is specifically important relating to the First Party Benefits. For the sake of this discussion, we are addressing Pennsylvania drivers and residents. It would most likely be different depending on your state of residence.

First Party Benefits Apply to the Named Insured on the Policy

First Party Benefits include Medical Expenses, Work Loss, Funeral Benefit, Death Benefit, and Extraordinary Medical Benefits. All these benefits apply to the Named Insured on the policy and any resident relatives in the household. For example, if the two spouses are named on the policy as insureds’, then they are covered by the policy regardless of residence.

A Non-Named Spouse Can Lose Coverage If They Move

However, if one spouse is not listed as a named insured on the policy, and that spouse moves out of the house, they no longer have First Party Benefits because they are no longer a “resident relative” in the household.

This becomes critical as it relates to children/dependents that are involved as well. The recourse for coverage would be to look at the limits on the policy of the vehicle they would be riding in or the limits of the other party that may be at fault in an accident. This could be very limited protection or none at all!

What Happens With Claims Involving Dependents?

Dependents, where there is shared custody, create additional considerations when it comes to insurance and to responding to insurance claims. If both parents have shared and equal custody, then, in the event of a situation where there is a liability claim as a result of the children, the policy of the parent who had custody of the children at the time of the incident would respond first.

If the claim exceeded the limits of that policy, the policy of the other parent may be called upon to respond to make up the difference. On the auto side, there could be the potential for both parents’ policies to respond to a First Party Benefit claim for a dependent depending on the amount of expenses incurred.

These are issues and situations that often are not part of the conversation when families break up. But, they are very real, and to only consider them after a claim has occurred adds additional stress. Amidst everything else, take time to consider how the pieces overlap and interplay, and the insurance changes when households break up that may apply to you.

Call our Account Managers here at Ruhl Insurance with your specific questions and concerns. We are here to help you navigate these situations in life. We can be reached at 717-665-2283 or toll-free at 800-537-6880. Or, drop us an email at info@iruhl.com.

Disclaimer: Information and claims presented in this content are meant for informative, illustrative purposes and should not be considered legally binding.