If you haven’t heard of divorce insurance, it’s because it’s a relatively new product on the market. Divorce insurance has been around for about eight years – since a North Carolina insurance company (Safeguard Guaranty Corp.) announced the novel idea in 2010. Today, divorce insurance is something all married couples should consider, just as they would other types of insurance. The creator of Safeguard Guaranty Corp.’s product, WedLock, states that the odds of divorce are higher than most things people insure themselves against.
How Does Divorce Insurance Work?
Divorce insurance, also called Marital Settlement Agreement Insurance (MSAI), serves to supplement unemployment insurance if a divorcee cannot meet his/her child or spousal support obligations. It is not insurance against the possibility of divorce. Instead, it kicks in to provide benefits only after a couple has finalized the divorce. It is a type of casualty insurance designed to keep couples financially stable after paying all the necessary court costs and divorce fees.
Monthly payments for divorce insurance depend upon the plan and provider you choose. Policies available through Safeguard start at $15.99 per month for $1,250 of coverage. Purchasing 10 units of Safeguard’s insurance provides $12,500 of coverage. After a couple carries divorce insurance for four consecutive years, each unit gains $250 in value. For example, if a couple carries divorce insurance for 10 years, they would receive a $27,500 payout after a divorce (the policyholders would have paid a total of $19,188 for the insurance).
Regardless of how many times one has been married, the price for one unit of WedLock insurance stays at $15.99. In most cases, a married couple purchases divorce insurance together. They do so to protect one another in the event of a divorce. Although it is possible for just one half of the marriage to purchase the insurance, this is not the typical setup or something that the creators of WedLock advise. One spouse purchasing the insurance could cause rifts in the marriage – especially if purchased in secret.
Is Divorce Insurance Right for You?
Divorce insurance is still new around the United States, although some couples are currently paying more than $1,000 a month for the coverage. It may seem like an unusual idea, but it might be an attractive choice for couples who are afraid of going below the poverty line in the event of a divorce. After all, statistics show that the average person loses 70% of his or her net worth after a divorce. Whether you think divorce is a possibility early in your marriage, having the insurance can give you peace of mind.
Discuss the idea of divorce insurance with your spouse to see if it’s a good choice for you. Remember, divorce insurance doesn’t mean either of you are planning on getting a divorce, just as a prenuptial agreement doesn’t mean divorce is inevitable. It can simply be a smart way to prepare in case the worst happens. Sit down with your spouse and discuss what the reality of a divorce would be like. Go over possible financial solutions if a problem should arise. If you realize you both would be better off with a bit of padding, divorce insurance might be a smart choice.
If you do think you want to invest in divorce insurance, do so sooner rather than later. Like other types of insurance, a waiting period must pass for policyholders to collect benefits. With WedLock, this period is four years. Other companies might have shorter or longer waiting periods. Divorce insurance isn’t for quick payouts during divorce proceedings. It is a safeguard that couples should purchase well in advance of any trouble in paradise.