Divorce insurance is a form of contractual liability insurance that pays the insured a cash benefit if their marriage ends in divorce. The first company to offer "Divorce Insurance" was SafeGuard Guaranty Corporation. The purpose of divorce insurance is to mitigate the risk of incurring significant financial loss as a result of a divorce proceeding. As divorce rates have increased around the world, divorce has become a major contributing factor to bankruptcy and poverty globally which in turn created the demand for such a product.
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History
Divorce insurance was developed in 2005 by John A. Logan. Logan is the Chairman, CEO and founder of SafeGuard Guaranty Corporation, a privately owned holding company which was incorporated solely for the purpose of developing such a product as a result of Logan's own financial turmoil following his divorce in 2002. In 2010 the first divorce insurance policy was sold in the United States, underwritten by Prime Insurance Company, a Utah based Surplus Lines insurer.
How policies work
Divorce insurance is a form of casualty insurance; specifically, contractual liability insurance. As such, divorce insurance reimburses the owner after a marriage (the contract in this case) is dissolved by way of divorce or marriage dissolution upon finalization of which, the policy owner submits a claim to the insurance company.
Divorce insurance policies are sold in 'units' of 'initial claim value' or the amount which would be paid on the first day that a benefit is available. Each unit has a fixed price and the number of units purchased relates directly to how much the insured/beneficiary receives when a claim is paid. In addition, the initial claim value increases by a set amount every year after the elimination period ends so that the longer the insured stays in the program, the more money they receive should they divorce. The result is that over time, a small unchanging monthly payment could result in a substantial benefit payment.
To protect against adverse selection, Divorce Insurance policies have a lengthy ‘elimination period’ or a waiting period before a claim can be filed. Currently the waiting period for the standard plan offered by the company that provides Divorce Insurance is 48 months.
Who offers it
Currently, only an insurance company in China offers something akin to Divorce Insurance that it markets as "Marriage Insurance", although the similarities to Divorce Insurance are unclear due to a lack of accurate information on the Chinese version. The only company to formerly offer the actual Divorce Insurance product in the US (or anywhere else) thus far has been Prime Insurance Company. The insurance was marketed and sold by the inventor of the product, SafeGuard Guaranty Corporation under the brand name of WedLock Divorce Insurance. WedLock Divorce Insurance is no longer available to the public due to an abrupt cancellation of the program by Prime in 2011. SafeGuard Guaranty's website now talks about a new product called Marriage Assurance(sm).