Divorce insurance has been all over the news recently with the launch of WedLock Divorce Insurance, a form of casualty insurance serving as your financial safety net if your marriage fails.
Cordell & Cordell managing partner Scott Trout was interviewed by WOWT-TV, an NBC affiliate in Omaha, Neb., about the legal ramifications of divorce insurance.
Trout cautioned that any benefits paid out from a divorce insurance policy could be considered community property. So it’s possible that those benefits could be split regardless of who paid for the policy.
“I think (divorce insurance) is a really, really bad way to start your marriage,” Trout said. “I think it’s too easy, and I think people find it their own therapy to just get divorced. They don’t want to work on it. It’s sad.”
DadsDivorce.com editor Matt Allen interviewed John Logan, the founder of WedLock Divorce Insurance, about the divorce insurance concept, the financial collapse divorce can bring, and the reaction he’s been getting.
Everyone is entitled to their opinion…
…and I’d be very curious to find out what Mr. Trout’s opinion of prenuptial agreements. No one wants to believe their marriage will fail, but I’m sure he wouldn’t argue that prenuptial agreements ought to be required in some cases. And the purpose of any prenuptial agreement is to prepare (well in advance of the wedding day) for the all-too-real risk of the marriage ending in divorce. Unlike prenuptial agreements, WedLock Divorce Insurance can be purchased long after the wedding day.
I do certainly agree with Mr. Trout that we, as a society, find it all too easy to give up on marriage as opposed to working harder to make it succeed. However, our place is not to judge others, simply to provide a financial safety net for those that suffer the financial disaster that comes along with divorce.
As taxpayers, we already foot a bill of $112 BILLION dollars annually in Federal, State and local taxes that are paid every year to support fragmented families. What happens to those folks that don’t have prenuptial agreements and who, years into their marriage, start to see cracks in the foundation of their marriage like infidelity, drug or alcohol abuse or domestic violence that signal them like a big red flag that their marriage my not survive much longer? Since studies show that 44% of American families go below the poverty line after divorce, it’s clear that the cost of divorce often breaks the bank.
No attorney, financial advisor or trust worthy family member would EVER counsel you to enter into a legal partnership that had only a one in three chance of success, where you stand to lose (on average) 77% of your total net worth, without some cautionary contingency plan, yet we do it every day. It’s called marriage.
Don’t get me wrong, I’m a HUGE advocate of the institution of marriage. Studies prove that people who are married are generally healthier and wealthier than their single or divorced friends. But statistics also prove that you’re more likely to get divorced in the next 10 years than you are to get into a serious car accident. Yet auto insurance is mandatory.
With regard to Mr. Trout’s contention that divorce insurance benefits “could be considered community property” – the operative words in that sentence are “could be”. No one knows for sure how Nebraska courts will rule on that subject, but in other States there is PLENTY of legal precedent with regard to the disposition of insurance benefits paid only AFTER the divorce is finalized, where the insurance policy had no accrued cash value (like Term Life insurance or home insurance, and not coincidently WedLock Divorce Insurance) regardless of how the premiums were paid. Not to mention that we advocate that both spouses buy identical policies or one spouse buys both, but the reality being that some benefit is better than no benefit. Better to have a third party insurer pay some of the expenses than to have all of them come from the family coffers.