Introduced in August by Kernersville, N.C.,-based SafeGuard Guaranty Corp., “WedLock” is a new type of casualty insurance that gives the unhappily married a payout after he or she is divorced.
Monthly premiums run from $15.99 for a payout of $1,250 to $3,198 ($15.99 times a maximum of 200 units) for $250,000 coverage.
To discourage people from signing up just before their divorce, policyholders must pay premiums on insured spouses for four years before the policy will pay out.
SafeGuard Chairman and CEO John Logan said the number of WedLock policyholders is growing monthly. “We don't share the numbers,” Logan said, “but it's more than a handful.”
Logan conceived the idea for Wedlock following his divorce 10 years ago.
“My finances went to hell in a handbag,” he said. “I thought I can't be the only schmuck this is happening to. That was my ‘aha' moment.”
Logan realizes most people, unless they've been divorced before, won't buy policies before they wed, because they don't anticipate divorcing. But policies, he said, may be bought discreetly by family, friends or an individual spouse after he or she weds and senses infidelity, substance abuse or other potential marriage-wrecking behaviors.
Edmond divorce attorney George Freedman is more than skeptical.
“They're playing on the fears of potentially getting a divorce,” said Freedman of Lester, Loving & Davies. “You'd be better off,” Freedman said, “contributing to a mutual fund for your child's education or a second honeymoon.”
With this insurance, he said, policyholders may “pay a whole lot of money on an investment that may never pay.”
Is it worth it?If the insured on a standard WedLock policy divorces after four years, a holder who pays $159.90 monthly for 10 units would have paid $7,675.20 in premiums and receive a claim payout out of $12,500. If the insured divorces after 10 years, the policyholder would have handed over $19,188 and would receive a payout of $27,500; insurers throw in $250 per unit for every year the marriage survives beyond four.
If policyholders desire a premium refund, including in divorces that occur sooner than four years, they can add a rider to their policies about $1 per unit, Logan said.
Though policies have no accrued value and only pay out after divorces are final, settlements under Oklahoma family law would be considered marital assets because marital money was used to pay the premiums, Freedman said.
Meanwhile, Patricia Goodman, Edmond certified financial planner and one of a few certified divorce financial analysts in the state, can see the need for divorce insurance.
“I've seen many divorcing spouses who aren't wage earners beg and plead for enough money to pay for divorces while they're pending,” Goodman said. “Divorce insurance could inspire the legal teams of such spouses to fully put in the effort needed versus wonder ‘Am I going to get stiffed?'”
“Why do we buy insurance for anything, if it's not to protect against devastating financial loss?”
Locally, divorces cost $5,000 to $10,000 per each divorcing spouse, Freedman said. They easily can be $20,000, $30,000 and more apiece for contested divorces involving child custody, he said.
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