Moving On: How Divorce Can Affect Your Auto Insurance

You hate your spouse. In fact, you can’t wait to be rid of them. They did this or that or the other thing. Whatever. It’s over now. And, you’re a wreck, emotionally. But, also financially. Wait. What?

Yeah. Did you know a divorce can wreck your auto insurance rates? It can. Here’s what you need to know.

The Competitive Nature Of Insurance Is To Blame

If you get into an accident, you usually need car accident legal consultation, if only to make sure the other driver doesn’t do something ridiculous like sue you. But, when you get a divorce, you’re probably going to pay more, before, during, and after the same accident. Why?

It has to do with the competitive nature of the insurance industry. Insurance companies have to figure out ways for you to do business with them. And, they are largely hamstrung when it comes to offering discounts. So, they only offer them in certain, limited, ways. One of those ways is when you get married.

Now, when you get divorced, the insurer is going to yank away that discount faster than you can blink.

So, that means that your premiums should rise between 5 and 10 percent. Ouch. But, there’s nothing you can do about it, really. You can just prepare yourself by budgeting the extra.

Tell The Insurer About The Divorce

Seems crazy, right? If you’re going to lose the discount, why advertise your divorce? Because the insurer is going to find out anyway and, when they do, they can make your contract null and void – and that’s worse than losing your discount.

Material misstatements of fact are a serious matter in the insurance business. And, concealing your divorce could be seen as a violation of the law.

The good news: most insurers will let you keep the discount until the divorce is fully complete and finalized.

Your Credit History Matters

In every state except perhaps California, Hawaii, and Massachusetts, insurers can use your credit history as a factor in pricing your premiums. So, if you’ve had a couple of mistakes during your marriage, expect them to show up when you get a divorce. Your income is going to be chopped in half or more and your personal debts will not be. And, your financial mistakes will count more heavily, unfortunately.

Check your credit history and score through Equifax, Experian and TransUnion by grabbing your reports free through AnnualCreditReport.com.

Don’t Let The Gap Happen

It’s common for formerly married couples to be a bit lackadaisical about buying a new policy. It’s not actually laziness. It’s that you’re overwhelmed with a bunch of other stuff you have to do. But, you don’t want to cancel the old policy before you get a new one in place. Yes, it costs more upfront, but legally, it’s important not to have a lapse in coverage – especially for car insurance.

If you drive uninsured, you could be held personally liable for any damages as a result of an accident. You could also be in serious trouble if you get pulled over or are found to be driving without insurance coverage.

Lara Fowler is a personal finance consultant who sees many individuals, mostly women, who are facing divorce. She tries to take time each month to write an article or two offering helpful insights which are published on personal finance sites.


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February 26, 2016 Moving On: How Divorce Can Affect Your Auto Insurance