December 31, 2009

Divorce Insurance – What’s Next?

Posted in Divorce tagged at 12:56 am by demetriagraves

Thought that you could get insurance for some unusual and wide ranging possibilities – how about Divorce Insurance? There is much discussion on the internet that it would be possible and even feasible for insurance companies to offer divorce insurance. Sound like a good idea? Anyone who has seen friends or family struggle through a messy divorce and the devastating financial consequences would probably be interested.

Actuarial tables are now available based on the lasted information from the 2000 U.S. Census, which asked detailed questions that allow one to compute a person’s risk of divorce. Research at the National Marriage Project at the University of Virginia has also helped to quantify the risk.

About two million Americans get married every year, and the chance that their marriage will not last is a toss up. According to the census data and other research, couples have a 20 percent chance of getting divorced within the first five years of marriage. They have a 30 percent chance of divorcing within 10 years. Overall, it appears that half of American marriages end in divorce.

The divorce process can take years sometimes. During that time, the joint assets often are tied up. Suddenly, there are two households to support and attorney fees to be paid. Moreover, financial pressures raise stress levels. These financial problems are often already an issue in many marriages that come apart.

The average family has about $8,000 in credit card debt, which means the average divorcing family has $8,000 in credit card debt, and they suddenly have to set up a second household.

An Ohio State study showed that the average person who divorces loses 77 percent of their net worth.

One way this type of insurance would work is to cover divorce costs, not the settlement or the living costs afterward. The average policy would have a $2,500 annual premium for coverage worth $200,000. But, of course, people could vary their level of coverage.

Looking at the census data, several risk factors associated for divorce have been identified. The main risk factors are: Age (younger is riskier); race (Asian is the lowest risk); whether a woman had forced premarital sex (a woman who has been raped has about a 50 percent higher risk of divorcing in the first five years of marriage), and income and education (those with more have less risk).

Some other factors that research has identified as conferring higher risk are the wife’s working and living in an urban environment. A wife with a high level of education is associated with a lower probability of divorce early in a marriage, but a higher probability later.

Considering the popularity of pre-nuptial and post-nuptial agreements, divorce insurance may be the perfect accompaniment.

And, finally, the divorce rate currently is about 50 percent of marriages and research suggests that those who come from divorced backgrounds are three times more likely to divorce themselves. The divorce rate, therefore, appears more likely to go up than to go down.



  1. John Logan said,

    We much prefer the term Marriage Insurance to Divorce Insurance since our product will reward people who stay married with a much larger benefit, along with providing a financial safety net to those unfortunate enough to become a statistic of divorce.

    • Thanks for your comment John. I get it – it’s seems similar to why life insurance is called that, rather than death insurance.

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