Divorce Insurance, Prenumptual Agreement, Preperation for the end

Are we really goiong to see insurance policies covering the costs of divorce in the near future?

"A professor at the University of Illinois at Chicago says it would be feasible for insurance companies to offer divorce insurance."

"J. Christopher Westland, a professor of information and decision sciences, says he began sketching out the actuarial tables for such insurance as an exercise, prompted initially by watching a friend go through a messy divorce and its financial consequences. After a little work, he says he found the idea is possible."

'“It’s basically a workable business,” Westland says.'

According to Profesor Westland, divorce policies would cover the costs associated with legally divorcing. That would primarily include attorney fees and court costs. It would not include any money for settlements or living expenses afterwards.

What about the moral hazard of offering an insurance policy that could encourage a spouse to file for divorce early in a marriage?

"...David Hoffman, a law professor at Temple University and an expert in contract law, who has written about divorce insurance, says he is not sure there is any way around the moral hazard and that is the idea’s undoing."

"No insurance company is likely to touch it, he says. In some states, it may not be legal to offer insurance with a moral hazard."

'“Given the moral hazard, I just don’t see it as an insurance product,” he says.'

With 50 percent of all U.S. marriages ending in divorce within 30 years, the notion of insurance against the new peril of 'Divorce' is more like saving money to cover the inevitable. Insurance companies would have to charge a premium equal to 50 percent of the benefit if they expect to at least break even on these new policies unlike homeowners insurance which is designed to insure, primariliy, against natural distaters that connot be predetermined. Can a homeowner expect a 50 percent chance that his home will catch fire, be burglarized, or destroyed in a windstorm? No. There is not a moral hazard associated with homeowens insurance. Arson is not a covered peril in any homeowners policy.

If it happens, more power to the attorneys who are the ones who will obviously benefit the most from divorce insurance. It would gauruntee their fees would be paid up to the policy limit. If you've been through a divorce, the attorney fees can create more stress than the actual breakup.

Sena Kimbrough
Big Boy Toy Insurance

A portion of this article was reprinted from the following osurce:
http://www.insurancejournal.com/news/national/2009/12/11/105912.htm