In a divorce, home insurance is typically the last item on the list – yet it is a contract that stands in one person's name while the home is in two people's names. As a broker, I see that the trouble comes not at the moment of the divorce but months later: the spouse who has moved out stops paying the premium, the one who stayed does not know about it, and only when water comes through the ceiling does it turn out that the contract has ended. Or the other way round: the contract is in force, a loss occurs, and the two former spouses end up in a dispute over who is entitled to the money. This article goes through the question from the home's side: who is the policyholder and who is the insured person, who pays, who receives the claim payment, and what to do if the home passes into one person's hands or is sold. If you are looking for the basics of who is who, the article on policyholder and insured person is the first step; this article picks up from there.
- The policyholder pays and makes the legal statements; the insured person is the one whose financial interest the contract protects: in a divorce the two can easily come apart, and under Hungarian policy conditions the contents belonging to the spouse who moves out typically fall out of cover, because they are no longer a relative living in the same household.
- The claim payment is due to the insured person, not the policyholder; for a jointly owned home, how the former spouses settle up between themselves is a question of ownership shares and the division of property, which the insurer does not decide – and if there is a mortgage, the bank's clause also matters for the payout.
- If the spouse who stays in the home did not take out the contract but is also an insured person, they can step into the policyholder's place by a written statement, without the insurer's consent; if the home passes into one person's hands or is sold, you need to ensure continuity between the end of the insurable interest and the start of the new contract.
Whose name is it in, and whom does it actually protect?
There are two roles in home insurance. The policyholder is the person who takes out the contract, pays the premium and makes the legal statements – amendment, cancellation. The insured person is the one whose property or financial interest the contract protects; according to the Home Insurance Guide of MABISZ (the Hungarian insurers' association), the two often coincide, but not necessarily. In a marriage this rarely causes problems: for contents, Hungarian policy conditions typically treat relatives living in the same household as the insured person as insured as well, and for the building, the owner – many policy conditions also the co-owner, but this varies from insurer to insurer, so it is worth checking the definition of ‘insured person’ in your own policy conditions.
Divorce and moving apart break this formula at two points. By moving out, the departing spouse ceases to be a relative living in the same household, and once the divorce is final, they also cease to be a spouse – which means that their personal belongings, wherever they are, typically fall out of the contents cover of the old contract. As a co-owner, however, they may still have an insurable interest in the building: under the insurance chapter of the Hungarian Civil Code (Ptk.), an insurance contract may be concluded by a person who has an interest in avoiding the event, or by someone who concludes it for the benefit of such a person. A contract taken out on a jointly owned home may therefore also protect the interest of the co-owner who moves out – depending on whether the policy conditions treat the co-owner as an insured person, or only the person named on the policy.
Who pays the premium – and what happens if the policyholder stops?
Paying the premium is the policyholder's obligation, not the owners'. If the spouse who moves out is the policyholder and stops paying after moving out, the contract ends by the route set out in Section 6:449 of the Ptk.: a reminder, a grace period, then retroactive termination – the article on unpaid premiums describes how this works. The spouse who stays in the home is typically not informed of this, because the insurer writes to the policyholder. The same applies to cancellation: the policyholder can cancel the contract even without the knowledge of the spouse who stays, because the legal statement is theirs to make.
For this situation, the insurance chapter of the Ptk., and following it the MABISZ guide, provides a tool: if the contract was not concluded by the insured person, the insured person can step into the contract by a written statement addressed to the insurer, and the insurer's consent is not required for this. By stepping in, the rights and obligations of the policyholder pass to the insured person; the person stepping in and the former policyholder are jointly and severally liable for premiums falling due in the current insurance period, and the person stepping in must reimburse the former policyholder for the costs spent on the contract – including the premium paid – which in a divorce forms part of the settlement between the two parties. In practice this means that whoever stays in the home and is an insured person can take over the contract in their own name – for this, insurers typically require their own form and the policy number. The other route is a new contract of your own, in which case the end of the old contract and the start of the new one must be timed so that there is no day without cover.
Who receives the claim payment for a jointly owned home?
Home insurance is indemnity insurance, and according to the MABISZ guide the person entitled to the insurer's payment is generally the insured person – not the policyholder, and not a freely chosen beneficiary either, because in indemnity insurance a beneficiary cannot be named. So if the spouse who moved out paid the premium but the spouse who stays is the insured person named on the policy, the claim payment is due to the one who stays. If both are insured persons – because the policy conditions treat co-owners as insured as well – the insurer pays the person entitled under the contract, and the settlement between the former spouses is a question of ownership shares and the division of property, which the insurer does not decide. In the event of a dispute, the parties must settle this between themselves, ultimately in court; the insurer may withhold payment until it is clear who is entitled, which also delays the repairs.
If there is a mortgage, there is a third party as well. According to the guide, under the mortgagee clause the lender is the person entitled to the payment in the cases specified in the clause and for the part exceeding the limit amount; in addition, banks typically also require a statement of consent for amending or terminating the contract. In a divorce, therefore, what happens to the loan and what happens to the insurance are linked: whoever takes over the loan and the home should also become the policyholder of the insurance, and the clause must also be added to the new policy. The article on home insurance alongside a mortgage describes how the clause works.
Moving apart: transfer, cancellation or cessation of interest?
Three scenarios are typical. In the first, the home remains in joint ownership, but only one of you lives in it. In this case the contract can continue, but it is worth transferring the policyholder role to the one living there – by stepping into the contract or using the insurer's amendment form – and accepting that the contents of the spouse who has moved out are no longer covered. In the second, one spouse buys out the other. The insurable interest of the spouse who moves out ends when their ownership share is transferred; if they were the policyholder and the sole insured person, according to the guide the contract ends on the day the interest ceases. The guide also states, however, that if the cessation of interest is solely the result of the transfer of ownership, and the new owner already had possession of the home earlier on another legal basis, the insurance cover passes together with the ownership, the old and new owners are jointly and severally liable for the premium due at the time of the transfer, and either party – including the insurer – may cancel the contract in writing with 30 days' notice within 30 days of learning of the transfer of ownership. This is typically true for the spouse who stays and already has possession of the home; even so, it is worth clarifying in writing with the insurer whether it will transfer the contract into that spouse's name and whether it will exercise its right to cancel. In the third, the home is sold: the insurable interest ends when possession is handed over, the contract ends with it, and both of you need to take out a contract for your new home – the article on moving house sets out the order of steps.
In all three cases, reporting the change of details is up to the two of you: a change of address, of the way the home is used and of the ownership situation is a circumstance that must be reported to the insurer, and neither I nor anyone else can do this on your behalf.
The belongings and liability of the spouse who moves out
If you move out – into rented accommodation or a new home of your own – the old contract typically gives you nothing: the contents cover applies to the risk location stated on the policy and to the insured person's shared household, and the personal liability cover likewise extends to the insured person and the relatives living with them, to an extent that varies from insurer to insurer. At the new address you therefore need your own contents and liability cover; renting has a logic of its own, which the article for tenants explains. Belongings left behind in the jointly owned home that the departing spouse no longer lives in – furniture, household appliances – remain part of the household of the insured person who stays, as far as the cover is concerned; who owns them is, again, a question of the division of property, not one for the insurer.
A practical order of steps if you are divorcing or moving apart:
- Look at the policy: who is the policyholder, who is the insured person, and whether there is a mortgagee clause.
- Decide who will keep the home and the loan – the policyholder of the insurance should be the one who stays.
- The spouse who stays should step into the contract or take out a policy of their own with continuous cover; the one who moves out should take out a policy for the new address.
- In a buyout or a sale, align the date on which ownership passes with the start of the insurance, and report the change.
- In a claim, the person entitled to the payment is the insured person; the settlement between the former spouses is part of the division of property.
If your situation is complex – joint ownership, a mortgage, two new addresses – I help where I can: if you let me know, I prepare the comparison and the paperwork needed for the transfer and the new contract; the statements and the signatures have to be made by the two of you.
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Sources
- Hungarian Civil Code (Ptk., Act V of 2013) – insurance contract: insurable interest, stepping into the contract, cessation of interest, Section 6:449 (non-payment of premium)
- MABISZ (Hungarian insurers' association) Home Insurance Committee – Home Insurance Guide (policyholder and insured person, person entitled to payment, stepping into the contract, cessation of interest, mortgagee clause)
