Sunday, October 24, 2010

Divorce Insurance

A company is now offering divorce insurance as protection against your marriage falling apart. While I don’t think this product can legally be sold in Massachusetts, it is a new concept that is worthy of discussion. Perhaps, someday, it will be legal to buy this in this state.
In Massachusetts, all insurance must be licensed. I looked at the Division of Insurance web site and didn’t find this listed. As a result, I think that they are not licensed in Massachusetts and can’t sell this insurance. I suggest that Massachusetts citizens check with the Division of Insurance before looking at this product.
Divorce insurance is being sold by SafeGuard Guaranty Corp., an insurance company based in North Carolina. The product is called Wedlock Divorce Insurance. The website does not indicate that they are limited to sales in certain states.
The insurance pays a lump sum in the event a policy holder gets divorced. The amount of the payment is based on the policy purchased.  The amount paid is not related to court orders for support or property division. The coverage is sold in units of $1,250.00 based on a monthly premium of $15.99. As an example, assume that a person purchased 10 units at a monthly cost of $159.90. If a divorce occurs, the company will pay the insured $12,500.00. There is a four year exclusion period so if the divorce occurs within four years, nothing is paid.
The biggest problem I see is that a Massachusetts court is likely to view the insurance policy as another asset subject to division. This would defeat the purpose of the insurance. Of course, insurance is based on the concept that the insurance company makes more money than it pays out. If you can save the money each month, you are better off.
I think this is an interesting idea but not a product than can benefit most people in this state if it can be lawfully purchased.

1 comment:

  1. Alan,

    We work very hard to ensure that misinformation about our company and our product is not dissemintated on the web, so in the interest of clarification I would like to point out that, as clearly described on the "About Us" page of our website, SafeGuard Guaranty Corporation is the MARKETER for WedLock Divorce Insurance - NOT the underwriter - hence the reason that SafeGuard Guaranty is not listed at the MA DOI. Wedlock Divorce Insurance is, in fact, available in all 50 states (and internationally) and is underwritten by various insurers depending on the state. In Massachusetts the policies are underwritten by Prime Insurance Company and can be lawfully purchased as a surplus lines product. Also, while the waiting period for the standard plan is indeed 4 years to protect the insurers from adverse selection, that period can be reduced to 36 months with the selection of a rider AND with the selection of another rider can guarantee the insured against loss of premium if they should get divorced during the elimination period. In addition, WedLock Divorce Insurance has no accrued cash value during the marriage, claims are paid only AFTER the divorce is finalized and based on legal precedent, will likely be treated similar to Term Life policies and as such, unlikely to be treated as a marital asset subject to division.

    - John Logan
    SafeGuard Guaranty Corporation