Insurance and Divorce

An oft-forgotten but crucial element of financial restructuring

If you’re going through or have gone through divorce proceedings, you know just how much work is put into restructuring your finances.

With roughly 37% of all marriages ending in divorce each year in Canada, an estimated 140,000 Canadians will be forced to divide their assets in housing, child support, personal property, and investments annually.There is certainly a lot to consider when assessing your financial situation during and after your divorce.

But what about insurance?

In her book, Divorce Dollars: Get Your Fair Share, Akeela Davis discusses the many types of insurance that could make or break your new financial independence. Davis points out the impact your varying insurance policies can have on your life if you are single, and juxtaposes the impact of those same policies if you are married.

Disability insurance, critical-illness insurance, and long-term care insurance are particularly important for the single adult, because his or her income is no longer supplemented by that of his or her spouse.

“It takes only six months of illness to wipe out years of savings if you have no other source of income to see you through,” writes Davis. Because single adults often don’t have a supplementary income, it is critical that they prepare for a situation in which they may not be able to work.

Life Insurance?

What about life insurance? Life insurance is often sold to groups, for instance in a workplace, at a reduced rate. If an individual is covered under his or her spouse’s life insurance which has been provided by an employer, that policy will no longer cover both spouses following divorce. Further, if a couple jointly owned a life insurance policy, there may be assets incorporated into the policy which need to be separated in the divorce proceedings.

There is a lot to consider on the matter of life insurance once you are divorced. One issue to think about is whether or not you actually need life insurance once you are separated from your spouse. If you don’t have anyone who is dependent on your income, it may not be necessary. However, should you decide that you do require life insurance, you may be able to divide a jointly-owned policy simply by speaking to your insurance broker. In some cases, you will need to dissolve your existing joint policy and take out your own life insurance policy.

Car Insurance

Leanne Stier, Assistant Vice President of Willis Canada Inc. in Vancouver, says that changing your car insurance can be just as important as altering your life insurance policy. You need to make sure that your vehicle’s registration and insurance are in your name, not your ex-spouse’s, if you are the primary operator of the vehicle.

There are many reasons to do this, but the foremost is that it ensures your coverage in the event of a car accident. If your name is not on the insurance policy, your insurance company may be able to deny your claim should you get into an accident. “This is particularly concerning if there is bodily injury to a third party,” says Stier. “You could potentially pay hundreds of thousands of dollars out of your own pocket.”

Furthermore, failure to register your vehicle under your own name could result in a fine if you get pulled over by the police. Not changing the name on the registration could also potentially allow your spouse to sell the vehicle out from under you.


Misrepresentation on any insurance policy could be adequate grounds for denying your claim or, in some cases, voiding your policy altogether. You should make your insurance broker aware of any changes to your policies as soon as possible. The results of failing to amend your insurance policies could be catastrophic; you can only gain from adjusting your coverage.

Further Reference divorce-dollars-3rd-cover-large This article refers to the best-selling book, Divorce Dollars: Get Your Fair Share, by Akeela Davis. The book is currently in its third edition and addresses everything from dividing the assets to retirement planning. Akeela Davis demonstrates how everyone can handle the financial challenges of divorce using careful planning and money smarts.

Read more about the book in our Web store.

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