Insurance is available for just about anything in your life or business that might involve financial loss: homeowner’s insurance, business continuation, E&O insurance, car or boat insurance, health insurance, key person insurance, fleet insurance, cyber liability insurance, product liability insurance—there are even celebrities who reportedly have had certain body parts insured (Mariah Carey had voice insurance, Heidi Klum’s legs were insured, Julia Roberts’ smile was insured, and Keith Richards had his hands insured). With all of these types of insurance available, you may wonder whether divorce insurance exists and, if so whether, it is a wise investment.
Specialized Divorce Insurance
Divorce insurance is not a product that is widely available or something most people purchase. However, it is an option you can consider. Most divorce insurance policies only insure you against the expenses related to the divorce process itself and cover some attorney’s fees, court costs, and some living expenses.
Divorce insurance policies do not cover:
- Property division
- Alimony (also called maintenance)
- Child support
Most policies include a waiting period, a specific number of years you must be married before the policy matures, and a payout is possible. Some companies offer riders for an additional cost that reduces the maturation period. The company that currently provides divorce insurance in the United States is not covered by any state guaranty program, so there is no protection for policyholders if the company goes bankrupt.
Alternatives to Divorce Insurance
Instead of purchasing actual divorce insurance, there are two things you should buy that will protect your marriage from divorce: couples counseling and prenuptial or postnuptial agreements.
Couples Counseling
Some religious institutions require couples who marry within them to participate in mandatory pre-marital counseling (such as pre-cana in the Catholic church). Any couple who is planning to marry can benefit from couples counseling to ensure they develop healthy communication skills, mutual respect, and methods for resolving conflict. Setting the right tone and learning how to talk to each other before you get married can ensure that your relationship will last.
Marital counseling is a wise investment if there are challenging issues or miscommunications in your marriage. Instead of harboring resentment, living with anger, or coexisting in an unhappy environment, couples can and should seek professional help. The American Association of Marriage and Family Therapists reports a 98 percent success rate for married couples who seek counseling. Counseling can help you strengthen your bond, resolve problems, establish boundaries, and restore trust.
The key to successful marital therapy is finding a counselor both you and your spouse trust and feel comfortable with. Both spouses must commit to the process and be honest and open with each other. Persistence and dedication to seeing the process through are required.
Prenuptial or Postnuptial Agreements
The best financial protection from divorce that is available is a prenuptial or postnuptial agreement. A prenuptial agreement is executed before you are married, and a postnuptial agreement is executed at any point after you are legally married.
Both documents are able to determine and direct all of the following in New York state:
- Which property is separate property and which property is marital property (and thus subject to division in a divorce)
- How marital property will be divided if the couple divorces
- How ownership of businesses will be handled if the couple divorces
- Which debts are separate and which are marital (and subject to division in the divorce)
- How marital debt will be divided if the couple divorces
- Child custody (with some caveats depending on what is in the best interests of the children and court approval)
- The amount of child support that will be paid if there is a divorce
- The amount of alimony or maintenance that will be paid if there is a divorce
- Escalation clauses that increase the amount payable as the length of the marriage increases or with the number of children welcomed into the marriage
Prenuptial and postnuptial agreements determine the disposition of assets that are in existence at the time the agreement is signed, as well as anything the couple may acquire or own in the future, separately or together. This allows for detailed financial planning and ensures that the agreement covers all financial issues the couple may possibly face in a divorce.
Prenuptial and postnuptial agreements must be:
- In writing
- Signed by both parties
- Entered into voluntarily, without duress or fraud
- Completed only after the couple makes full financial disclosure to each other
- Not unconscionable
Additionally, each spouse should have their own attorney review the agreement before signing to ensure that it is fair and fulfills the couple’s intentions.
These types of agreements provide a wide variety of benefits, including:
- Reducing attorney’s fees at the time of divorce
- Greatly lessening the amount of conflict involved in the divorce since financial matters are settled
- Removing uncertainty about what will happen if the couple does divorce
- Establishing trust through the full disclosure of assets and negotiation of a fair disposition of assets
Prenuptial and postnuptial agreements should be completed by working with a skilled divorce attorney who fully understands the nuances of New York law and completely understands your goals.
Couples counseling strengthens your marriage, helping you avoid divorce. Prenuptial or postnuptial agreements provide protection should all else fail, and the marriage ends. The combination of these two protections provides the best insurance against divorce.