Divorce insurance to cover damages when the vows break
Because the “for poorer” part of marriage vows often comes with a nasty split, couples have a new type of contract to consider: divorce insurance.
A scholar at one of Canada’s leading law schools predicts the controversial insurance, recently unveiled in the U.S., will come to be “offered widely” in this country, where nearly two in five marriages — 38 per cent — are dissolved before the 30th wedding anniversary.
Given such odds, the insurance itself may be less surprising than the time it took someone to come up with it.
“That old maxim that when you get divorced, you lose half of everything? That’s wishful thinking,” says John Logan, whose North Carolina-based company is behind Wedlock divorce insurance. “You might give your spouse half your net worth, but you’re going to give another quarter to expenses and legal fees.”
Divorce insurance is sold in units of protection, with each unit costing about $16 per month for $1,250 in coverage. Wedlock adds $250 in coverage to each unit every year after the mandatory waiting period of three to four years — a caveat in place to prevent imminently separated couples from exploiting the product.
“It’s not cheap, but look at the risk we’re taking,” says Logan, who lost his house and effectively went broke during his own divorce a decade ago. “We’re not home insurance, where the chances are one in 300 that you file a claim; our odds are one in three.”
James Morton, adjunct professor at Osgoode Hall Law School in Toronto, predicts we’ll come to see such insurance offered broadly across Canada. He notes that a lump-sum payout upon divorce may make more sense to some people than a pre-nup — or domestic contract, as it’s called here — because judges have “broad discretion to ignore” the latter.
He’s unsure, however, of how well the product will take off.
“It’s important to make sure the insurance is worth it,” says Morton. “If the matter is not contentious and the spouses are pretty well agreed, (divorce) costs should be fairly low — say, in the $5,000 range, all included. But if the matter is contested, costs can be enormous. I’ve seen cases with legal costs exceeding a million dollars.”
Divorce expert Anne-Marie Ambert likewise expects the insurance to breach our borders, partly because of the public perception that marriage is more fragile than ever. But a report she authored last year shows there are only 221 divorces per 100,000 population now, representing a sharp decline from 362 in the late 1980s.
“If you get this (insurance), you’re really stating, ‘We’re not going to make it,’” says Ambert, a retired professor of sociology from York University. “And let’s keep in mind that the insurance companies aren’t doing us a charity … This really isn’t going to help those who need it most, which are poor people, or even plain middle-class people who can’t afford it either.”
In general, the past president of the Canadian chapter of the International Academy of Matrimonial Lawyers says the best way Canadian couples can protect themselves is to think ahead.
“The most effective course of action,” says Stephen Grant, a partner at McCarthy Tetrault in Toronto, “is to plan going into a marriage the consequences coming out.”