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(Insurance) markets in everything

Now that we're all used to pre-nups, it's time to start thinking about divorce insurance:

Ever had that sinking feeling that the person your friend is marrying is perfectly awful? Of course not, because you love everyone. But should it happen, you now can give the perfect wedding present: divorce insurance.

WedLock, as it's coyly named, is a new type of casualty insurance that gives the unhappily married policyholder a payout after he or she is unhitched. It costs about $16 a month for every $1,250 of coverage. But to discourage people from signing up just prior to their divorce, policyholders must ante up for four years before the policy will pay out. It adds a premium of $250 per unit for every year the marriage survives beyond four. So if a policyholder who bought 10 units got divorced after 10 years, he or she would have handed over $19,188 and would receive a payout of $27,500. It's probably not worth getting divorced for, but the lump sum might salve some wounds, whether through lawyers, vacations or subscriptions to the Rhapsody Book Club.

I'm hoping it's only a matter of time before divorce default swaps. Those of us who aren't involved in the marriage want a piece of the action, too. Plus, think of the benefit to the eagerly engaged if there was a liquid and properly incentivized market laying odds in the days before anyone said "I do." And though you could worry that the market would be mainly moved by insider trading, that could be a good thing: If the spread leaps up and one of the partners has no idea why, well, it might be time to start wondering who exactly knows something you don't...

By Ezra Klein  | September 20, 2010; 9:11 AM ET
 
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Comments

We can securitize our insecurity.

Posted by: jduptonma | September 20, 2010 9:35 AM | Report abuse

You know, this is funny and pretty awful, but a cash pay out when you get divorced isn't just something to make you feel better. Having at one time worked for a judge doing matrimonial cases, I can tell you that getting divorced is a financial hardship on most families. Trying to split up a home and maintain a standard of living for the parents and the kids is next to impossible for all but the wealthiest families. And yes, lawyers are expensive.

Posted by: MosBen | September 20, 2010 10:12 AM | Report abuse

Well, now that I think about it, I guess the question is really whether you get a good rate of return on your divorce insurance investment. Over a ten year period you could probably do better if you invested that $19k somewhere else and then had to split it up to pay for divorce costs.

Posted by: MosBen | September 20, 2010 10:14 AM | Report abuse

Generally, one should insure things that one cannot afford to replace. Buyers should be wary of anything else. From an actuarial perspective, it does sound like divorce can be turned into an insurable event, but I don't think it will be worth it to many people.

Posted by: weiwentg | September 20, 2010 10:27 AM | Report abuse

Generally, one should insure things that one cannot afford to replace. Buyers should be wary of anything else. From an actuarial perspective, it does sound like divorce can be turned into an insurable event, but I don't think it will be worth it to many people.

Posted by: weiwentg | September 20, 2010 10:27 AM | Report abuse


"We can securitize our insecurity."
Posted by: jduptonma

very good comment!!
what a great name for the insurance..."wedlock.!"
a funny post...very good for a monday morning!!!

Posted by: jkaren | September 20, 2010 11:08 AM | Report abuse

"Shoulda' got that insured, GEICO for ya moneeey(your money)"

Kayne West - Golddigger

Posted by: jnc4p | September 20, 2010 11:13 AM | Report abuse

hey lookey there you have to pay for 4 years before you can collect. Didn't anyone tell these people that pre-ex conditions are banned?

Posted by: visionbrkr | September 20, 2010 11:21 AM | Report abuse

So in a non-transparent market it should be pretty easy to make a bunch of different bets against the marriage with a pile of people, then hire a homewrecker, or just collude with one or bother parties.

Hmm, do the policies claw back the payout if you remarry?

Posted by: paul314 | September 20, 2010 7:56 PM | Report abuse

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