Divorce Insurance--Is It A Smart Bet Against Your Marriage?

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Should all partnered pairs purchase divorce insurance considering the majority of Illinois homeowners carry earthquake policies? You don't need a degree in applied mathematics to recognize the significantly higher probability that your marriage may not last.

Of course, I prefer to leave it to the economists to balance the statistical see-saw and the pundits to debate the moral implications. As a lawyer, it is the legal aspects of divorce insurance that I find intriguing.  Specifically, what is the timeline of when and how you receive the funds from the insurance settlement? Also, my main concern is whether those funds become marital property if you purchased the insurance during the marriage or if marital monies were used to purchase the policy? If so, there may be no real benefit to such insurance and you just increased the proverbial marital pie.

With its creative moniker, WedLock, divorce insurance is sold in units of protection, by SafeGuard Guaranty Corp, a start-up based in North Carolina. The casualty insurance can be used to cover the costs of a divorce, such as legal proceedings or setting up a new apartment or house. WedLock claims once you send them proof of your divorce, they will send you the cash equivalent of your purchased units of protection. Still, if you purchased the policy during to the marriage and it was purchased with marital monies, your annuity may be marital in nature.

Further, even if purchased prior to the marriage, creative lawyers may argue that without the marriage (and divorce), the funds should be deemed marital property. The list of potential arguments could go on ad nauseum.  The smarter alternative would be to "purchase" a prenuptial agreement or even a postnuptial agreement and ensure that your funds are divided according to your grand plan. 

And caveat emptor. Policies don't mature until 48 months after their effective date (though people can purchase additional riders to reduce that maturity period to 36 months and to get their premiums back if they happen to divorce before maturation).

So, is it worth being unhappy to wait for a financial settlement? Staying in a miserable marriage may lead to a protracted legal battle, and unfortunately there's no insurance policy large enough to protect against that possible disaster.

 

 

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  • Would an insurance company really insure against a moral risk (in the insurance sense; sort of like insuring against punitive damages)? Even though they say they pay, I'll bet that the policy has so many conditions that they won't.

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