According to the American Psychological Association (APA), more than 50% of marriages in the U.S. will end in divorce. Not only is divorce taxing on the people involved, but it can also have a drastic impact on a couple's shared finances, and on what's left after they split. It’s no wonder, then, that people seek divorce insurance to help provide a safety net if the worst happens.
If you’re looking for divorce insurance, you may have a hard time finding this exact type of policy, but there are a number of products that you can combine to help provide compensation for the cost of divorce and the legal fees that come with it.
- There is no standard version of divorce insurance in common use, but you can use other products and services to cover some of the costs of dissolving your marriage.
- Insurance coverage for fallout from divorce is not the same thing as a prenup or a marriage settlement.
- If your divorce is contested, mediation is a much cheaper option than going to trial.
- If you can prepare for the chance of divorce ahead of time, you can save money on legal fees and other costs in the future.
Does Divorce Insurance Exist?
There is no product in common use today known as divorce insurance. You may come across a niche policy here or there, but for the most part people don't plan for divorce the same way they do for other major life events. Or if they do, they use other methods to secure their assets, or to protect against the kinds of loss that happens with divorce (which we'll cover later on). The concept of insuring against the cost of divorce is not unheard of though. It would be much like that of other forms of insurance: if you suffer a financial loss from some sudden or unforeseeable event, you could expect to receive a payout from your insurer to help buffer against the impact. There are many insurance products on the market that can produce this same effect, and cover some of the costs that come along with getting a divorce, without pointing to divorce head-on.
How Does a ‘Prenup’ Differ?
A prenuptial agreement, also referred to as a “prenup” or antenuptial agreement, is a legal contract drawn up between future spouses to promise that if the marriage dissolves, the terms that they agreed upon prior to getting married will be met.
Both a prenup and the types of insurance that are bought to address the cost of divorce take effect at the time the marriage ends. Other than that, the purpose and function of each differs greatly, and they have very little in common.
The "pre" in prenup means that it is set up before the couple says "I do." The intent is often for one spouse or the other (or both) to protect the assets they brought into the marriage. It outlines what will happen to these shared assets in the event of a divorce.
With insurance taken out to cover the chance of divorce, on the other hand, the contract instead would be between an insurance company and one of the spouses. In it, the insurer would agree that upon the couple's divorce, they will pay a set amount to the spouse who holds the policy. This payout is in exchange for premiums paid.
Even though the prenup is a legal contract, it may still be contested or invalidated. This also means it can be challenged by one party after they divorce. Like any contract, certain rules govern the way a prenup is formed. If it is proven to be signed under duress or coercion, or if one party's state of mind was impaired at the time it was made, it can be struck down by a court of law.
An insurance policy is more of a product than a contract. The spouse who pays into it will receive a payout if the divorce event happens, with no contest.
What Is a Divorce Settlement?
Prenups and insurance to pay legal expenses also differ from a third tool that many future spouses use called a divorce settlement. The main factor that sets it apart is that it occurs as the marriage ends rather than before the wedding. (The terms of a marriage settlement may also be outlined in a prenup). Divorce settlements are written contracts between couples that work through the terms of the divorce going forward. They may include details such as how to divide the assets, who gets to stay in the shared home, who has rights to other property, the custody of children, a visitation schedule, spousal or child support, and much more.
What Would Divorce Insurance Cover?
If you have a notion of what you may want to protect in the case of divorce, or of what your ideal divorce insurance product would look like, chances are you can find a few forms of insurance that will cover the asset or assets of choice. Each divorce is has its own battles, but here are a few common things to think about when building a plan to protect your assets in case of divorce:
- Legal fees
- Fallout from splitting assets in half, or the cost to replace things that are lost to the other party
- Help with child support or alimony issues
- Counseling, or other means to treat distress for all involved
- Shifting from dual income to single income
- Cost of living budget for single vs. shared items
- If you were on your spouse's health plan, the cost for new health insurance
How Much Does Divorce Cost?
When you think about paying for a divorce, one of the most hefty costs will come from legal fees. Based on a 2019 reader survey from legal research firm NOLO, the average total cost of divorce is $12,900, and the cost of a divorce lawyer can run between $100 and more than $400 per hour. While these numbers give you a rough concept of basic fees, the bill can get far more complex and costly if there are any disputes between you and your spouse, or if the process becomes drawn out.
Although there is no one “divorce insurance policy,” there are services that can help cover some of the costs.
Insurance for Divorce Costs
Finding solace through a range of insurance products when your marriage is having trouble will not replace what you lose, but it can help protect your health and financial well-being more than if you had no coverage at all. Here are a few products or legal services that can be used to help with the cost of divorce and legal fees:
- Health insurance or employee benefits: Divorce can trigger a lot of stress and complex feelings, so you or your spouse (and children if you have them) may wish to get proper support. Look into plans from a health insurance exchange set up by the ACA. Or, if your employer sponsors a plan, this could be a good option. It may also include Employee Assistance Programs (EAPs), with mental health services for you or your children.
- Legal insurance: There are legal insurance policies that may be able to provide limited legal advice over the phone for no-fault divorce, and in some cases legal counsel or support with child custody issues. Be sure to ask how each option works with the law because some exclude high conflict or contested divorce, or other family law issues, and these laws do vary by state.
- Legal fee discount plans: There are legal discount plans that you can sign up for through lawyer networks that provide basic help, discounts or lower rates on legal fees for simple divorce cases. Some may even include a free consult, or a 30-minute phone call before they start charging. Look into these before taking on full-priced counsel.
Mediation or a collaborative divorce will not only save you a great deal of distress, but in most cases it will also cost much less than a contested divorce.
Not every divorce needs to go to trial. If you and your spouse agree to work things out without a trial, you may opt for mediation (also known as collaborative divorce or "conscious uncoupling"). Compared to the tens of thousands of dollars most people spend on divorce, a mediation might cost between $100 and $300 per session (though prices vary), and most reach resolve after a few sessions.
The Bottom Line
Though standard divorce insurance does not exist per se, there are many products and services that can help with costly aspects of ending a marriage. You might seek out legal insurance, legal discount plans, or counseling that may be covered by your health insurance. Since legal fees are often the most costly aspects of divorce, legal insurance may be a smart option to look into ahead of time. It will allow you access to guidance if you decide to divorce, and can often be found at a very low monthly price.