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September 20, 2010

Daily Buzz: New Company Offering Divorce Insurance?

With the divorce rate hovering around 50 percent, "'til death do us part" is sounding more and more like just a saying than a real commitment. So what are the newly engaged to do if they think they are marrying the right person but are a little scared off due to divorce rates?

Well, a new company is giving a little extra security in the form of divorce insurance.

According to Time.com, WedLock, a company launched on Aug. 5, is selling couples divorce insurance so they can get a helpful payout if their marriage fails.

WedLock Divorce Insurance is "casualty insurance that provides a lump sum of cash (based on initial claim value units of $1,250 USD per unit purchased, up to $250,000) that is paid if your marriage ends in divorce. In addition, each unit increases in value by $250 annually after the policy's waiting period ends so that the longer you have your policy, the higher your claim benefit will be - without any increase in annual premium," the company's site WedlockDivorceInsurance.com says.

Basically, to protect itself against people who are already getting divorced, the policy has a four-year waiting period for a pay out. But once a couple has been paying for the insurance for four years, they pay about $16 a month for every $1,250 of coverage, plus a premium of $250 per unit for every year the marriage survived.

Of course, buying this kind of insurance seems to defeat the purpose of marriage before you've even tried, but truthfully I'm not so sure there's much of a philosophical difference between this and a prenuptial agreement.

And considering how devastating divorce can be to a person's (and a couple's) finances, it probably helps each party rebound from the fallout.

But what do you think? If you found out your husband/wife or their parents got this insurance for each of you, would you be offended or would you see some reason to it?

If divorce is something you are dealing with or thinking about, read our blogger Ellie DeLano in "Divorce Diaries."

- Alexandra Gekas, Associate Editor

Comments

I'm an obstetrical nurse and, believe me, I see it all. Yours, mine and our kids, women who go into labor with a restraining order on their husbands. Women who are having a baby that isn't their husband's child. I could go on and on. Don't think I work at some inner city hospital either. It is in a very exclusive area. I've seen men come in with their wife one month and six months later I recognize them but with a different woman.

Unfortunately, it's a sign of the times. Marriage isn't necessarily a goal in this day and age. Therefore when people finally tie the knot they often do so without the true committment couples years ago had. If it doesn't work out, oh well. Problem is bothersome things interfere with that thinking. Things like children, home ownership, one spouse making significantly more money than the other.

Divorce is an ugly word but a reality. I've seen co workers devastated when their husband or wife walks leaving them with the mortgage, children to support and not enough money to do any of those things and pay a lawyer as well.

As far as a wedding gift, I intend to buy a policy for each of my children when they marry. Even if it means I have to pay the premium I'll have peace of mind knowing that if the marriage doesn't succeed they will have the funds necessary to make the transition for all involved as painless as possible.

I have been married to the same man for over thirty years so I'm not biased in any way. I hope all three of my children have the same happy and long marriage that my husband and I have had. But, as my wise old mother once told me, it never hurts to have a little socked away in case fate deals you a hand you didn't expect.

Wedlock insurance? You bet!

Anita
But if they don't I like to think that I've done my part in

I beg to differ with Ellie. I think it's a great idea! If you've actually gone through a divorce, you'd realize that it does cost a ton of money that you probably don't have. Even if it's an AMICABLE divorce, it's still not cheap. You have to find a new place, and probably have to replace some big ticket items (washer, dryer, dishwasher, oven, refrigerator, car - need I go on?).. I think it would make you feel MORE secure in your marriage, knowing you'll have a soft landing if it doesn't work out..

Alexandra,

Thanks for the great post.

We think the time is right for an insurance product like this because too few people who aren't well off enough that a prenup is on their "to-do" list before marriage really understand that marriage is a legally binding contract that impacts every level of their financial status from the day they take their vows.

While we don't expect anyone to be thinking about divorce (unless they have a prenup) BEFORE they marry, there are plenty of red flags that may appear long AFTER the wedding day that may signal a crack in a marriage's foundation. Domestic abuse, infidelity and drug addiction just to name a few.

A POST-nuptial agreement may be out of the question for most but divorce insurance is a great way to create a financial safety net in the event those cracks become big enough that the marriage becomes unsustainable in the future. Most marriages don't fall apart overnight like Tiger and Elin. Most people see it coming years in advance.

And while we're huge advocates of marriage counseling and other therapy to help save marriages, in reality too few couples seek that counseling soon enough and by that time, one party has already made up their mind to divorce regardless of the therapy.

More importantly, most people don't really understand what's at stake when they divorce. Here some stats that ought to be eye-opening for many Woman's Day readers:

• Divorce reduces the average person's wealth by 77% - Jay Zagorsky, National Longitudinal Survey of Youth study findings, Journal of Sociology, Ohio State 's Center for Human Resource Research

• Forty-four percent of women experience poverty following divorce. - Julia A. Heath and B. F. Kiker, “Determinants of Spells of Poverty Following Divorce” Review of Social Economy, 50

• Absent remarriage, the typical divorced woman can expect a standard of living near the poverty level, and this drop cannot be explained by selection effects (causes) into divorce. - Pamela J. Smock, Wendy D. Manning, and Sanjiv Gupta, “The Effect of Marriage and Divorce on Women’s Economic Well-Being” American Sociological Review, 64

• About one-fifth of women who apply for welfare benefits for the first time do so because of divorce or separation; about one in four mothers who were first propelled onto welfare by divorce are still welfare-dependent five years later. Many never recover. - Johanne Boisjoly, Kathleen Mullan Harris, and Greg J. Duncan, “Trends, Events, and Duration of Initial Welfare Spells” Social Service Review

• The long-term effects of divorce on welfare expenditures are even higher, as daughters of divorce are three times more likely to become unwed teen mothers, and are also more likely later to be divorced. - Andrew J. Cherlin, et. al., “Parental Divorce in Childhood and Demographic Outcomes in Young Adulthood” Demography and Paul R. Amato and Alan Booth, A Generation At Risk: Growing Up in an Age of Family Upheaval (Cambridge, MA: Harvard University Press)

• US Taxpayers foot an annual bill of over $112 BILLION dollars in Federal, State and Local taxes to support fragmented families every year. - Institute for American Values, Center for Marriage and Families; Scafidi, Benjamin, Principal Investigator. The Taxpayer Costs of Divorce and Unwed Childbearing: First-ever Estimates for the Nation and All Fifty States. 2008

These are just samples of the numerous studies done on how divorce negatively impacts the traditional family’s financial well-being. And the odds of divorce DWARF the chances of other calamities that we commonly spend $1000's of dollars on each and every year, like fire, flood, auto and disability, without thinking twice.

Ask anyone who's been divorced. We know we can't stop divorce from happening, but we CAN offer an affordable way for many to have the opportunity (and the dignity) to support themselves in the event of divorce. From our perspective, if we can keep even ONE child from a life of poverty somewhere down the road, than we know we're doing the right thing.

John Logan
CEO
SafeGuard Guaranty Corporation

Wow. Romantic, starry-eyed me says "That's a horrible idea!" Taking bets on whether or not your marriage will last before you even begin is no way to start a life together. Still, I can't deny that if I'd had a policy like that in place, I'd have some badly needed cash in my hand right now. Maybe it's not such a bad idea, after all.

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