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September 9, 2021 Apollo Magazine

Will My Divorce Affect My Home Insurance?

Every year, thousands of Canadians get divorced. Whether it’s due to financial issues, infidelity, lack of communication or unmet expectations, there’s no shortage of reasons. According to Statistica, divorce rates have been steadily rising since the 2000s, with 1.88 million Canadians divorced in 2000 and 2.71 million Canadians divorced in 2020. 

While a divorce may be the best solution for you and your partner, it can have a pretty big impact on your finances. Many Canadians often forget that divorce affects more than your assets and debts but smaller details like your home insurance. 

Will My Divorce Affect My Home Insurance?

The impact a divorce can have on your home insurance depends on how your house is divided between you and your ex-partner. In Canada, you can either choose to keep your home or sell your home during a divorce. However, if you’re in a common-law relationship and you separate, it may not have as much of an impact on your home insurance. 

How Is A Home Divided In A Divorce In Canada?

In Canada, your relationship status will affect the way your home can be divided.

Married Couples

When you get divorced as a married couple, both partners will have equal rights to the home, regardless of whose name is on the home title. If one partner wants to sell, they will need permission from the other spouse to do so. The only way you can bypass this is if the court grants you permission to do so. 

If you decide to keep the home, you’ll need to buy out your partner by offering a lump-sum payment or some other asset that will balance the division in assets. However, in order to keep the house, you’ll need to requalify for the mortgage on your own to show your lender you can still afford the mortgage payments. 

Common-law Relationship

Unlike married couples, partners in common-law relationships don’t have equal rights to the home. Generally, whoever bought the house, whether before or during the relationship, will have ownership and the right to stay in the house. This means whoever’s name is on the title will get to choose what to do with the house. However, if you and your common-law partner both have names on the title, then you’ll need to either sell the house and split the cash or buy out your partner. 

How Is Your Home Insurance Affected In A Divorce?

Keeping The House

Whether you’re married or in a common-law relationship, if you decide to keep the house in a divorce, there are certain things to keep in mind with your home insurance. 

Who Is The Homeowner? – In Canada, a home can only be insured by the homeowner. So, if you become the new owner of the home after a divorce, you’ll need to ensure that it is reflected in your current home insurance policy. This will ensure that both your property and the contents of your property are protected. 

Moreover, you’ll want to update your home insurance policy according to the way your other assets are divided in the divorce. If you receive any jewelry, art or other expensive items that are stored in your house, then you’ll want to update your home insurance policy to adequately cover those contents. 

Whose Name Is On The Policy? – When you get a divorce it’s important to notify your home insurance company that you are the sole owner of the property and that the home insurance policy should be in your name only. Generally, the person listed on the policy is covered and will be able to make changes to the home insurance agreement, so it’s important to have your ex-spouse removed. Moreover, with your ex-spouse gone, you may need to make small or even large changes to your policy so make sure you speak with your policy holder to help find the best solution for your needs.

Changing Relationships – A divorce can cause changes in the way family members are viewed in a home insurance policy. In general, children and those who live inside the residence are typically considered as parties who are covered under your home insurance policy. However, if your custody over your children is divided during the divorce and now only spend half the time in your home, they may be redefined under your home insurance policy, which can affect your coverage. As such, it is important to keep your insurer informed of all changes in order to maintain your coverage. 

Selling The House

If you and your spouse decide to sell the house in a divorce, then you’ll want to ensure that your current home insurance policy is cancelled after it’s sold. Moreover, depending on your new living arrangements, you may need to purchase a new homeowners or renters insurance policy. 

  • If You Buy A New Home  – If you plan on buying a new home after a divorce, you’ll need to purchase homeowners insurance in order to protect your home property and its contents from theft, loss and damage. If you are unable to reside in your home due to certain damages, your home insurance policy may also cover you for additional living expenses like a hotel. 
  • If You Rent A New Home – On the other hand, if you decide to rent a home or move into an apartment, you will need to purchase renters insurance. This can protect you from any accidental damages caused to the property you’re renting plus cover the cost of replacing everything in your home in case of events like fire or theft. 

Bottom Line

Divorces are often a very costly process that can significantly affect your finances. Moreover, a divorce doesn’t just divide your assets and debts, but it also affects other aspects of your life such as your expenses, credit score, home insurance, life insurance and not to mention your emotional health and well-being. If plan on keeping your house during divorce be sure to update your insurer to ensure you are properly covered. Similarly, if you plan on selling your house, don’t forget to cancel your old policy and find a new one based on your new living arrangements.