Here’s a new option for those worried they’ll end up on the wrong side of the statistics that show so many marriages ending over time: divorce insurance.
SafeGuard Guaranty Corp., an insurance start-up based in North Carolina, recently released what it’s billing as the first world’s first divorce insurance product.
The casualty insurance is designed to provide financial assistance in the form of cash to cover the costs of a divorce, such as legal proceedings or setting up a new apartment or house. It is sold in “units of protection.” Each unit costs $15.99 per month and provides $1,250 in coverage. So, if you bought 10 units, your initial coverage would be $12,500 and you’d be paying $15.99 per month for each of those units. In addition, every year, the company adds $250 in coverage for each unit.
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.
So how does the company prevent people who know they are going to get a divorce from signing up? To prevent that kind of adverse selection, the policies don’t mature until 48 months after their effective date (though people can purchase additional riders to reduce that maturity period to 36 months and to get their premiums back if they happen to divorce before the policy matures).
And what about other possible selection problems related to people with volatile relationships or a family history of divorce purchasing policies in large numbers?John A. Logan, chief executive officer of SafeGuard Guaranty, said the company has performed risk assessment and actuarial studies with this in mind. He notes that even in the worst case scenario, not all of those divorces would happen at once.
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