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DIVORCE INSURANCE: SOME FACTS AND PROS AND CONS

Divorce insurance is being marketed by Wedlock Divorce Insurance. You may visit their web site at http://www.wedlockinsurance.com/. The basics of the insurance are as follows:

“The product is sold as individual policies. You buy it in units of coverage. Each unit is valued at $1250 at a cost of $15.99 per unit. For instance, if you bought 10 units of Divorce Insurance; it would cost you $159 a month.... Policy holders can buy up to 200 units of divorce insurance which is $250,000 in coverage.”

“Then, if you get divorced and your policy has matured (see below for the maturation rules), you would send WedLock proof of your divorce. In return, you’d receive a lump sum of cash equivalent to the amount of coverage you had purchased.”

You must wait four years to divorce to be covered, unless you buy an early divorce rider which allows coverage after 36 months.

A person may buy the insurance for himself. Spouses may buy the insurance for each other. Or a parent may buy the policies for their child.

If a married person buys the policy for him or herself, interesting questions arise. If the policy premiums are paid during the marriage with funds earned during the marriage, the policy could be considered a marital asset. In other words, the person who purchased the policy may have to pay their spouse a portion of the insurance proceeds! This seems to be a “con.”

A “pro” might take place where a parent, believing the child has made a bad marriage decision, buys the insurance. The purchase of the insurance would be with nonmarital funds and would probably not be considered a marital asset. Also, if a parent buys the insurance, the payment of premiums and the existence of the insurance would be less of a burden on the marriage. Purchase by parents, might actually be a smart move.

Of course, prenuptial agreements are enforceable in most states and can be used to protect spouses in a bad marriage.