Ten years ago, when I was first starting to work with divorcing people, I had an idea that I thought would make divorce just a little bit less devastating - at least on a couple's bank account. The idea was part of my "divorce preparedness plan" and it was to have what I called, "marital insurance."
Being a therapist, I couldn't exactly implement this idea but it has always bothered me that divorcing couples often have to come up with outrageous sums of money that they rarely have as a liquid asset in order to dissolve their marriage and end this legal contract.
I've seen people have to cash in on retirement accounts, kid's college funds, savings accounts, and liquidate any assets that they can simply to pay for attorneys' fees.
According to Forbes.com, the average amount a couple pays for a divorce is $15K to $30. That's quite a lot of cash for people to have to come up with at a time when they are about to have to live on less money.
We face few other potential hazards that do not offer insurance: we have liability insurance, disability insurance, malpractice insurance, fire, flood and earthquake insurance; we have accident, illnesses and even life insurance; we have insurance for our pets and our possessions, and even wedding insurance but we have had no safety net to fall into if the marriage doesn't work out.
Given the incredibly high likelihood of divorce compared with any of these other incidents, it's shocking that the insurance industry did not start capitalizing on this twenty or thirty years ago. I think it's a sign that divorce has become more socially acceptable in this past decade.
At last, an insurance company from North Carolina called, Safeguard Guaranty Corporation is offering divorce insurance. The protection policy for divorce, called WedLock, provides a Divorce Cost Calculator and a Divorce Probability Calculator (that only has a 13 percent margin of error!) on their website to help you know whether you need to invest in a policy or not.
What I think we'll see developed next is the IDA (individual Divorce Account) or a CDA (Couple's Divorce Account) and, frankly, I think it's a good idea, given that divorce is now a very real fact of life. Of course, people can always put $20 aside in their own bank account earmarked for divorce as well.
To learn more about WedLock and see how it works, go to:
http://www.wedlockdivorceinsurance.com/?AspxAutoDetectCookieSupport=1
Comments
Susan,
Thanks for your point of view. The reality is the risk of divorce is real and tangible. In fact, the odds of divorce are higher than many of the risks you mention that we commonly insure against today. For example: 1 in 300 that your house will burn down in any given year. A little higher for flood damage over the life of your mortgage - 1 in 60. And actuaries using standard mortality tables for Life insurance peg the odds of you dying over any 20 years in your lifetime at 8 out of 1000 (or 1 in 125). Disability comes in even more frequent at 1 in 80 but too few people are smart enough to insure their income (which is what disability insurance actually does) even though their income is what pays for everything else.
Now let’s look at the odds of divorce. The odds that you'll divorce if you're on your first marriage is 1 out of 3 (32%). And don't feel safe just because you reached past that 8 year mark by which most 1st marriages fail, because there's a big spike right around year 20. In fact, due to the fact that people are living longer, we're now seeing more and more marriages after 30 years of marriages. Look at Al and Tipper Gore if you think you're immune. And for people already on their second marriage? Chances are high they already know the devastation that divorce can cause but their odds of marriage failure are 2 out of 3 (67%). Third marriages are almost 3 out of 4 (72% fail).
You hit the nail on the head with people not being able to afford the cost of divorce. With divorce attorneys charging fees up to $400 an hour, a family’s assets are easily obliterated during a divorce. In fact, on the average, divorce results in a loss of 77% of your net worth according to a study done by Ohio State University.
Expenses for both men and women often skyrocket after a divorce. Consider a father of two who decides to move out and get his own apartment, leaving his kids with his soon-to-be ex-wife. Now he must pay all the expenses of his own apartment plus spousal and child support. Spousal support could go up to the age of retirement if the former spouse doesn’t remarry, and child support goes to the age of 18. Both types of support can easily run into hundreds of thousands of dollars.
Likewise, the former wife may find herself in a more difficult financial situation as a single parent. Especially considering that only about 23% of child support is ever paid as ordered. She may have to find work, but if her children are young, she’ll then also have to find childcare, which can easily wipe out anything she would make by working. In fact, women are hit the hardest by divorce with 44% spending some time below the poverty line as a result (Julia A. Heath and B. F. Kiker, “Determinants of Spells of Poverty Following Divorce”). Considering about one-fifth of women who apply for welfare benefits for the first time do so because of divorce or separation and about one in four mothers who were first propelled onto welfare by divorce are still welfare-dependent five years later (Johanne Boisjoly, Kathleen Mullan Harris, and Greg J. Duncan, “Trends, Events, and Duration of Initial Welfare Spells”) I think you'll have to agree that many never recover.
We know divorce isn't something that anyone wants to think about when they're madly in love, but people also need to realize that marriage is a contract and that their financial security is impacted at all levels.
John Logan
CEO
SafeGuard Guaranty Corporation
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