Tuesday, September 01, 2009

Would You Buy Marriage Insurance?


posted by Michele Olson


With health insurance on everyone’s mind, US News and World Report had an interesting article recently about some more “exotic” types of insurances that are going to become available. The one that caught my eye was marriage insurance.

Early next year, at least one company expects to start offering marriage insurance. The policy will pay out in the event of a divorce as well as in the event of a long-lasting marriage. According to the Chief Executive of the Safeguard Guaranty Corp which plans to offer the plan, it’s designed for people who want to stay married. And because divorce can be financially devastating, the insurance is designed to ease some of the burden.

The policy can be purchased starting at a dollar a day. The divorce benefit increases over time, so people who stay married longer and then divorce receive more than those who divorce after shorter periods. For a typical policy with a $100,000 face value, the couple gets $12,500 if they divorce after five years. After 24 years the payout is $64,500. But if the couple stays married and celebrates their 25th wedding anniversary they get the full $100,000.

Wow. My husband and I could have been $100,000 richer six years ago! Unfortunately, the $64,500 is still too high and could be perceived as an incentive TO divorce by some couples not getting along and needing some cash. In some cases, it might even pay for the divorce…which is probably the intent. If you had put away the dollar a day from the first day of your marriage…in some type of decent savings or investment account and not touched it, you could do better than the insurance.

The company feels it will make the money they need to be in business from client’s premiums and customers who buy policies and end up cancelling. It also speaks to the insurance company’s certainty that they don’t expect the majority of marriages that take the insurance to last until payout time. Insurance companies are in the business to make money.

Would getting $100,000 after 25 years be an incentive for you to work on your marriage if you purchased this policy on your wedding day?

Who knows? Now instead of registering at department stores for gifts they would like, couples may be listing the name of an insurance company where you can pay part of their premiums.

What do you think?

2 comments:

john said...

Michele,

You’re right of course that as an insurance company we’re not a charitable organization, so we’re in the business to make money, but we’ve designed our policies to give our Marriage Insurance policy holders two things: Piece of mind and financial security.

Since you implied you’d celebrated your 25th anniversary 6 years ago, I’ll wager you’re a late Boomer just like me. Back when we were in our late teens, though the divorce rate was at its highest, the majority of Baby Boomers grew up in two parent families. And divorce was a bad thing back then, but in most cases, both parents didn’t already have full time jobs, or sky high mortgages or carry $8000+ of credit card debt in their pocket. That left at least some room for an additional revenue stream to set up the required second household without breaking the bank.

Today the family landscape is much different. Today both parents likely have a full time job to pay for that mortgage and credit card debt, and chances are they still outspend their income. Combine that with the fact that today we now have the largest population of adults that grew up in broken homes and that study after study shows that people who grew up with divorced parents are 3 times more likely to divorce themselves. As a result the US Census has made the dire prediction that people who marry today only stand a 1 in 3 chance of ever seeing their 25th anniversary. That spells a recipe for financial disaster.

What’s worse is that today, 44% of American families go below the poverty line for some period of time as a result of divorce. That’s downright scary.

Unfortunately we can’t fix yesterday but we can have a positive impact on the future. We can offer a lot more than financial support in terms of marriage education, counseling and a host of other resources to ensure that those marriages in trouble that can recover, do recover.

On the flip side, we know some marriages will fail despite the best of intentions and all the help possible. For those folks we’ll provide a financial safety net that will allow people the dignity to support themselves instead of adding to the $112 BILLION in Federal, State and local tax dollars that is paid every year by US taxpayers like you and me to support fragmented families.

Also, while I certainly agree that a savvy and well disciplined investor might be able to “put away [a] dollar a day from the first day of your marriage…in some type of decent savings or investment account”…human nature being what it is, we all know not many people have the discipline not to dip into that fund over time for that new carpet or daughter Jenny’s braces.

Not to mention that the premise that one spouse, planning to divorce the other, might raid the investment bank, leaving nothing for the other spouse is not only NOT out of the realm of possibility, but in fact it happens more often than you know.

But to be clear, by no means do we want Marriage Insurance policies to replace a good financial plan which includes Life and Health insurance, other investments and diversification (or even a prenup). However, considering that the stock market has only outperformed short-term CDs by a mere 0.2 annual percentage points in the 59 years since the S&P’s inception – that’s not much of an equity premium when you compare it against a Marriage Insurance policy’s superior return that is unaffected by any economic factor, consumer index or interest rate.

Call it a “forced” savings account or long term retirement nest egg, but for people who stay married it’ll be nice reward, and for those that turn out to be a statistic of divorce, it may be the only thing that keeps them afloat in the raging storm that divorce so often becomes.

We hope you’ll support our cause and help us reverse the trends that we’re seeing. And if we’re really lucky, maybe we’ll create an entire industry around marriage education and support far beyond what we have today.

Sincerely,

John Logan
CEO
SafeGuard Guaranty

thinkmarriage.org said...

John!
Absolutely great to hear from you. I hope you have had a moment to explore our website www.thinkmarriage.org to see that we are all about reversing the trend of divorce as we know it leads to many social ills including poverty. We are not for marriage at any cost, knowing that any type of abuse cannot be tolerated.
We are wondering if you could add an incentive into your plan, that would help people not move to divorce because they see it as a way to pay off bills with insurance when they may just be hitting a rough spot in their relationship. Often all people need is some marriage education.(This is different than counseling)
Could you offer a premium discount or rebate for those who prove they have taken an approved marriage education course along the way...or even every year? That is what we offer in workshops, along with coaching. If someone does not have a class in their area, they can take a class online. Marriage education and coaching which work on communication and conflict resolution skills go a long way in keeping marriages together. Much like a good driver discount...this could be a part of your plan.
Let us know if we can be of service as a non profit to help you bring in the importance of heatlhy relationship and marriage eduction in a tangible way to your upcoming audience. Thank you so much for taking the time to express your thoughts in our blog.
All the best in with your company.
Michele