Overview

The American Psychological Association (APA) has claimed that more than 50% of marriages fail in the United States, and thousands of divorce applications are filed every month. 1 Divorce can have a significant negative influence on a couple's joint finances as well as what is left over after the divorce, in addition to being burdensome on the parties involved. Therefore, it makes sense that people would look into divorce insurance to help act as a safety net in the event of the worst.

There are some products that you can combine to assist give compensation for the expense of a divorce and the associated legal costs, though you could have trouble locating divorce insurance that specifically covers this sort of policy.

While we are at it, we will also discuss what divorce insurance coverage is. Let's discuss how divorce and insurance affect the joint finances of couples and marriage insurance policies to get a better understanding.

Introducing the WedLock divorce insurance coverage

This novel concept was invented by a corporation with headquarters in North Carolina. In 2010, Safeguard Guarantee Corp initially presented the innovative concept. Wedlock was the name given to the divorce insurance policy.

Since then, other insurance companies worldwide have developed comparable divorce insurance products. A divorce insurance package was later introduced in September of that same year after being announced in 2011 by the German insurance company ARAG. Countries in Europe, like Spain, have already begun to favor such measures. Some employers in America provide the policy as a benefit.

If a divorcee is unable to pay child or spousal support, divorce insurance, also known as Marital Settlement Agreement Insurance (MSAI), supplements unemployment insurance. It is not protection against a potential breakup. Instead, it begins to provide benefits once a couple has reached a divorce settlement. After paying all appropriate court charges and divorce fees, it is a kind of casualty insurance meant to keep couples financially stable.

How does divorce insurance work?

The plan and provider you select will determine the monthly premiums for divorce insurance. Safeguard offers policies starting at $15.99 every month for $1,250 of coverage. Safeguard's insurance costs $12,500 when purchased in ten units. Each unit increases in value by $250 once a couple carries divorce insurance for four years in a row.

No matter how many times someone has been married, the cost of one WedLock insurance unit always remains at $15.99. The majority of the time, a married couple buys divorce insurance jointly. In the event of a divorce, they act in this way to safeguard one another. Even while it is conceivable, neither the WedLock founders nor the normal setup recommends having just one-half of the marriage purchase the insurance. When one spouse buys the insurance, especially if it is done covertly, there may be problems in the marriage.

Settling uneven finances

How does the business then discourage those who are already getting a divorce from signing up? The policies don't mature until 48 months have passed since their effective date in order to avoid that kind of unfair selection (though one can easily buy additional riders to decrease that maturity duration to 36 months).

What about further selection issues involving individuals who buy insurance in huge quantities and have tense relationships or a history of divorce in their families?

The organization has conducted actuarial analyses and risk assessments with this in mind, according to John A. Logan, chief executive officer of SafeGuard Guaranty. Even in the worst-case situation, he points out, not all of those divorces would occur at once.

Why is divorce insurance coverage important?

According to a recent census, one in every three hundred people faces a house fire. During the term of their mortgage, one in every sixty people experiences a household flood. The odds of dying over any twenty years in your lifetime are eight in a thousand, according to actuaries who used standard mortality figures to make this determination.

In light of these figures, the likelihood that someone will have a divorce during their first marriage is roughly one in three (32%).In contrast, the U.S. Census 2010 Statistical Abstract states that the likelihood of a person being involved in a serious auto accident is 1 in 4. The failure rate for those in their second marriage increases to 2 out of 3 (67%).

Although Canadian figures varied significantly, the rate of marriage failure is rising. Pre-nuptial agreements are now frequently utilized to give spouses financial security, despite the WedLock product's dismal appearance.

Do you really need divorce insurance coverage?

Although some couples are presently paying more than $1,000 per month for the coverage, divorce insurance is still relatively new in the United States. Although it might seem like a strange concept, it might be a desirable option for couples who are concerned about falling into poverty in the event of a divorce. After all, research indicates that the average divorcee loses 70% of their net worth. Whether you believe that early in your marriage, divorce could be a possibility, having insurance can help you feel more secure.

To determine if divorce insurance is a good option for you, talk to your partner about the concept. Keep in mind that purchasing divorce insurance does not indicate that you two intend to divorce. It is more of a pre-marriage agreement.

Conclusion

We have covered the part of what is divorce insurance coverage and how it operates like a prenuptial agreement. With couples, it can come off as a shocker but is it really?

Keeping in mind that divorce insurance coverage isn't the most popular as it's recently launched, people might not want to see this in a better light. However, this kind of scheme can actually save a person's future from an unstable financial position.