What every divorced person really, needs to know.
Your “home, sweet home” can turn sour if you’re divorced and you haven’t done your homework to make sure you’re getting the best and most affordable house insurance on the market. Senior Managing Editor, Amy Danise of Insure.com was kind enough to lay it all out there for us, in a candid Q & A.
1. Question: What should every divorced person really know about house insurance?
Answer: Make sure your EX is off that policy! If your EX is still on the policy (because you forgot to take your EX off) then if he/she is sued for something that’s covered on the existing policy then he/she may be able to tap into that policy, and it will cost you.
2. Question: I made sure my EX is off the policy, now how often do I have to review my homeowner’s policy?
Answer: It’s wise to analyze your coverage every year. If you’re newly divorced, you may need to revise your policy, especially if your spouse has taken belongings with them. For instance, some people purchase “riders” for expensive objects to make sure they’re covered; these may be for jewelry, antiques, computer equipment, or firearm collections. If the spouse has taken these items make sure it’s off your policy.
3. Question: What if the spouse was operating a home office, does that increase homeowners insurance?
Answer: Yes. If the insurance company knew about the home office that would be an added risk, so no longer having the home office would lower your premium.
4. Question: What if I remarry? Do I have to put my new husband/wife on the policy?
Answer: Absolutely, your insurance company wants to know who is in the household. I know people don’t want to think about this but what kind of risk are you marrying? If this person has a history of claims and you are adding him/her to your policy, you will literally pay for that.
5. Question: Why do they need to know who’s living in my house? Aren’t they just insuring the house’s physical structure?
Answer: In terms of liability, insurance companies want to know who is living in your house. Is that person risky? Insurance companies would probably run a report on past claims for that person. Agents research people through a database called Clue Comprehensive Loss Data Exchange. (It’s the database that most insurers tap into–so not only do they report claims into it, but also they can run queries on it for new customers.) So let’s say your new spouse has a history of 3 fire claims, that’s going to be a problem, and your house insurance policy would be re-priced accordingly to that risk. Insurers are basically saying, if you have a history of claims then statistically we find that you will make more claims.
6. Question: Can I get access to this “Clue Comprehensive” database?
Answer: No, it’s privately run by the insurance companies, you can’t run inquiries on someone else, but you can obtain a C.L.U.E. report which documents your own past claim reports. Your CLUE report (past claims): This way you can make sure the report doesn’t have a incorrect claim on file. Having inaccuracies on your file can ‘”ding” you when you go to get new insurance or make a renewal. You can obtain a free C.L.U.E REPORT each year thru LexisNexis free C.L.U.E report.
7. Question: Should my home insurance rate go up each year?
Answer: Your house insurance rate shouldn’t necessarily go up if your variables remain the same. You are insuring primarily for the reconstruction of your house (in the case of a fire, windstorms and other perils.) So a common mistake is that people think they need to insure for their real estate value. Real estate value is unrelated to house insurance value. If your house burns down, your land is still there. Home insurance agents basically calculate the local construction costs to rebuild or repair your house.
If your rates go up or down a little, that’s all going to hinge on your local construction costs. (Again, you are insuring the house, not the land it sits upon.)
8. Question: Does the current real estate value of my house affect my home insurance premium? Let’s say my house was worth 500,000 when I purchased it, but now the market value is 250,000, will that impact my home insurance rate?
Answer: Definitely not. Insurance premiums are really based on construction rates. In your example, the 500k home reduced to 250k is a land devaluation. Unfortunately, in some housing markets that are really bad, people are finding that the insurance value of the house is much higher than their real estate value. So the house would cost more to rebuild, than they could get for it, if they tried to rebuild and sell.
Further reading:
5 Best Tips for buying Home Insurance