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Divorce insurance anyone?

By Jay MacDonald ·
Friday, August 13, 2010
Posted: 8 am ET

Insurance has a soporific effect on most sober adults that falls somewhere on the snooze-o-meter between a catnap and a John Tesh concert. That’s understandable considering the impermeable jargon of life insurance, the microprint disclaimers of auto insurance, the hairsplitting qualifiers of homeowners insurance and the options-that-all-sound-alike of health insurance. All for a fistful of paper that promises that life’s worst-case scenarios won’t get any worse.

Life and death. Car crashes. House fires and floods. Health emergencies. They’re all most unpleasant to contemplate.

But how cool would it be to insure against emotional loss?

Just such a product hit my inbox this week. It’s called WedLock, and it claims to be the world’s first divorce insurance. WedLock entrepreneur John Logan prefers to call it "marriage insurance."

WedLock offers up to $5 million in casualty insurance if your marriage ends in divorce. If you also opt for the Legal Separation Rider, you can receive 50 percent of the premium total at separation with the balance payable once your divorce is final.

Each “unit of protection” costs $15.99 per month and provides $1,250 in coverage. Once insured, your insurance rates cannot increase. Your coverage amount increases annually by $250 per unit however.

WedLock is offered by SafeGuard Guaranty Corp., Logan's insurance startup based in Kernersville, N.C., and underwritten by Prime Insurance Co., a surplus lines insurer based in Salt Lake City.

Although the WedLock product is designed to cover divorce-related expenses such as attorney fees, moving expenses, new digs, child support, alimony and the like, the insured is free to spend the lump-sum payout any way they choose.

The company’s website notes that spouses can buy policies for each other. Or a parent (insert father of the bride) may insure their offspring (I’m thinking lovely daughter here) against that sad day (“I told her!”) when she kicks that (no-good bum) to the curb.

If your marriage is already on the rocks or in divorce proceedings, WedLock won’t help, as there is a maturity period of four years before benefits can be paid. You can buy down the maturity period to three years, but really – would you?

Critics point out that divorce insurance creates a moral hazard by providing the insured a financial incentive to behave in ways that might make divorce more likely. Most of us husbands hardly need help in this arena. Logan hopes one day to offer a handsome return of premiums for couples whose marriage reaches the 25-year milestone. 

As an entertainment tip, I can highly recommend the website’s Divorce Probability Calculator as a fun icebreaker for your next wedding shower or bachelor party.

Would you say “I do” to divorce insurance? Or does it rate as the biggest romantic buzz kill since ESPN’s SportsCenter?

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Finance Jobs
August 23, 2010 at 12:45 am

This is a wonderful opinion. The things mentioned are unanimous and needs to be appreciated by everyone.Life and death. Car crashes. House fires and floods. Health emergencies. They’re all most unpleasant to contemplate.

Jay MacDonald
August 19, 2010 at 12:21 pm

Hi, Debra: I posed your question to John Logan, CEO of SafeGuard Guaranty Corp. Here's his reply: "If they'd been smart and gotten the return of premium rider that allows for them to get their money back during the elimination period, then their premium would be returned. But even after the wait period is over, because we're not a life insurer, we can't have any sort of death benefit. The way this works is very similar to a disability policy or an accident policy in that if the event -- in this case, the divorce -- doesn't happen and they die before it happens, then they don't get their money back, unfortunately."

Debra James
August 18, 2010 at 4:45 pm

What happens to the policy in the event that one of the spouses dies before the 4 year waiting period is over?