In This Article
Divorce is normal. However, the financial implications of legal separation can be enormous and are ever-increasing.
David, a 36-year-old entrepreneur who has filed for divorce, must arrange a huge sum of money for the alimony his ex-wife has sought. While his investments will pay a part of this amount, he still has to arrange a significant chunk of it in the next few months.
Had he signed up for divorce insurance coverage, he would have been ready to face this unanticipated financial burden caused by the legal separation.
As per the latest facts, global divorce rates are on the rise. As per the data, about 44% of Americans end in divorce, most happening in the first eight years of marriage. The fact is that divorce is real.
Divorce can be taxing not only emotionally but also financially for both partners. So, many people are seeking divorce insurance as a safety net if something worse happens. Yes, it is possible to purchase an insurance policy that will cover the expenses associated with ending the marriage.
Countries like Egypt have enacted laws to make divorce insurance mandatory to ensure men can pay alimony to their ex-partners without worrying about financial burdens. And many countries, like the United States, have enacted laws for the same.
For example, in the USA, we have Marital Settlement Agreement Insurance (MSAI), also called divorce insurance. It comes into force when the couple has finalized the divorce and ensures they are financially stable after paying all the government, court, and divorce fees.
Divorce insurance is a financial concept that has been discussed in various countries. However, it is not a very popular product, as it’s a relatively new product in the market. This product has been in the market since 2010 when this novel idea was announced by the North Carolina Insurance Company.
So, what is divorce insurance, and how does it work?
What is divorce insurance?
Divorce insurance is a financial product, usually taken at the time of the marriage, that covers the costs associated with ending the marriage. It provides protection against legal separation or divorce and covers all expenses, such as alimony, child care, etc. Divorce insurance comes into force when the couple has finalized the divorce. It ensures they are financially stable after paying all the government, court, and divorce fees.
Today, all married couples should consider buying divorce insurance, just like any other type, as the odds of divorce are high. Buying an insurance policy that will pay for the costs associated with legal separation is a financially prudent idea.
How does divorce insurance work?
Divorce insurance supplements as unemployment insurance when the divorcee can’t meet their child’s or spouse’s financial obligations as mandated by the court of law post-divorce.
It activates to provide the benefits only when the couple has finalized the divorce process and is legally separated. The primary purpose of this insurance product is to keep the couple financially stable after the divorce.
The amount of premium you pay will depend on your earning capacity and the income profile of you and your spouse. Also, the monthly premium for divorce insurance depends on your chosen insurance plan and provider. Generally, there is a two- to three-year initial period when the claim is not admissible.
The price of the policy does not increase with a second or third marriage. However, this product is definitely recommended to people who are in their second marriage, as they recognize that divorce is possible.
In most cases, a married couple subscribes to divorce insurance together as a unit to protect one another in the event of a divorce. Nevertheless, only one of the partners can purchase the insurance. However, this is not generally recommended, as the spouse purchasing the divorce insurance can create conditions for divorce to claim the insurance amount, especially if they have purchased it secretly.
What does divorce insurance cover?
If you’re thinking about what divorce insurance might cover and you have an idea of what you’d like your ideal divorce insurance to include, you can find insurance options that cover the assets you want to safeguard. While every divorce presents its own unique challenges, here are some common factors to consider when creating a plan to protect your assets in case of divorce:
- Legal fees
- Costs associated with dividing assets or expense of replacing things lost to the other party
- Assistance with child support or alimony matters
- Counselling or other support for emotional distress
- Managing the transition from two incomes to one
- Budgeting for living expenses as a single individual compared
- The expenses related to obtaining new health insurance if you were previously covered by your spouse’s plan, etc.
Which companies are offering divorce insurance in the USA?
There is only one company that offers divorce insurance in the USA, and that is SafeGuard Guaranty Corp. Their product is called Wedlock, and it is a parametric insurance product that pays out a benefit if you get divorced within a certain period of time after purchasing the policy.
Wedlock is sold in units, with each unit costing $15.99 and providing $1250 in coverage. You can purchase as many units as you want, up to a maximum of 25 units ($31,250 in coverage).
To be eligible for Wedlock, you must be at least 18 years old and married. You must also have a prenuptial agreement or postnuptial agreement in place. Wedlock policies last for one year, and you can renew your policy each year.
If you get divorced within one year of purchasing a Wedlock policy, you will receive a payout equal to the total value of your policy. For example, if you purchased 10 units of Wedlock, you would receive a payout of $12,500.
Wedlock is a relatively new product, and it is not yet clear how popular it will become. However, it is an interesting option for people who are concerned about the financial costs of divorce.
It is important to note that Wedlock insurance is not a substitute for sound financial planning. If you are considering divorce, it is important to speak with a financial advisor to discuss your options.
Is divorce insurance right for you?
The concept of divorce insurance is still new in the United States but is growing. It seems like an uncommon idea, but it is an excellent choice for couples who hope for the best and prepare for the worst. As per the latest data, an average person loses 70% of their financial worth after a divorce. Some couples are already paying more than $1,000 a month for divorce insurance coverage to safeguard their interests and attain peace of mind.
So, if you are planning to get married or are early in your marriage, you should discuss the idea of buying divorce insurance with your second half to assess if it is a good idea for you.
Buying divorce insurance does not mean you are contemplating a divorce or are pro-divorce. Still, it’s just that you want to safeguard your financial interests in the unlikely event of divorce. So, it would be best to discuss this with your spouse early in the marriage so that you can surpass the waiting period for claiming the amount in the event of divorce. Generally, there is a two- to three-year initial period when the claim is not admissible.
Divorce insurance is not a tool for quick pay-outs during the process of divorce but a safeguard against the odds of legal separation and divorce.
FAQs related to divorce insurance
Divorce insurance is a financial product, usually taken at the time of the marriage, that covers the costs associated with ending the marriage. It provides protection against legal separation or divorce and covers all expenses, such as alimony, child care, etc.
A prenuptial agreement is a contract outlining the distribution of assets in the event of divorce. In contrast, divorce insurance can help alleviate financial difficulties resulting from divorce. However, it’s important to note that an insurance policy is not meant to serve as a replacement for a prenuptial agreement. In fact, insurance companies are envisioning a future where divorce insurance is seamlessly integrated into prenuptial agreements.
Whether or not you should get divorce insurance depends on your individual circumstances. If you are concerned about the financial costs of divorce and you can afford to pay the premiums, then divorce insurance may be a good option for you. However, it is important to weigh the pros and cons carefully before making a decision.
It is also important to note that divorce insurance is not a substitute for sound financial planning. If you are considering divorce, it is important to speak with a financial advisor to discuss your options.
Eligibility requirements for divorce insurance will vary from company to company. However, most companies require that policyholders be married and have a prenuptial agreement or postnuptial agreement in place.
The global divorce rate is ever-increasing. So, every couple who is deciding to marry or is married should buy divorce insurance to cover their legal and alimony expenses in the unlikely event of divorce. This product is definitely recommended to people who are in their second marriage, as they recognize that divorce is possible. Buying divorce insurance does not mean you are contemplating a divorce or are pro-divorce. Still, it’s just that you want to safeguard your financial interests in the unlikely event of divorce.
In most cases, a married couple subscribes to divorce insurance together as a unit to protect one another in the event of a divorce. Nevertheless, only one of the partners can purchase the insurance. However, this is not generally recommended, as the spouse purchasing the divorce insurance can create conditions for divorce to claim the insurance amount, especially if they have purchased it secretly.
It is best to buy divorce insurance as early as possible in the marriage because there is a two- to three-year initial period when the claim is not admissible. So, if you are planning to get married or early in your marriage, you should discuss the idea of buying divorce insurance with your second half to assess if it is a good idea for you.
Divorce insurance comes into force and provides benefits only when the couple has finalized the divorce process and is legally separated. The primary purpose of this insurance product is to keep the couple financially stable after the divorce.
You can customize the divorce insurance coverage. However, in general, it covers the following:
1. Legal fees
2. Costs associated with dividing assets or the expense of replacing things lost to the other party
3. Assistance with child support or alimony matters
4. Counselling or other support for emotional distress
5. Managing the transition from two incomes to one
6. Budgeting for living expenses as a single individual compared
7. The expenses related to obtaining new health insurance if you were previously covered by your spouse’s plan, etc.
The cost of divorce insurance will vary depending on the policy you choose and the company you purchase it from. However, it is generally more expensive than other types of insurance, such as health insurance or car insurance.
The amount of premium you pay will depend on your earning capacity and the income profile of you and your spouse. Also, the monthly premium for divorce insurance depends on your chosen insurance plan and provider. Some couples already pay more than $1,000 a month for divorce insurance coverage to safeguard their interests and attain peace of mind.
Technically speaking, if the divorce insurance policy was under the name of your ex-spouse, your coverage would end unless you are the policyholder yourself. Discussing the nitty-gritty with your insurance service provider would be best.
There is only one company that offers divorce insurance in the USA, and that is SafeGuard Guaranty Corp. Their product is called Wedlock, and it is a parametric insurance product that pays out a benefit if you get divorced within a certain period of time after purchasing the policy.
To file a claim on your divorce insurance policy, you will need to contact your insurance company and provide them with documentation of your divorce. This documentation may include a copy of your divorce decree as well as proof of any expenses that you incurred as a result of your divorce.
