Divorce Insurance: A Concept Ahead of Its Time or Doomed to Fail?

Carlos Vidal-Melia

No 2025-02, Documentos de Trabajo del ICAE from Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico

Abstract: Despite the significant economic impact associated with marital dissolution, divorce insurance remains conspicuously absent from contemporary risk management portfolios. This paper addresses this paradox by developing a multi-state, simulation-based actuarial framework that calculates risk-adjusted premiums incorporating critical demographic, economic, and behavioral variables—such as age at marriage, previous divorce history, and income disparities. Unlike previous failed attempts (notably WedLock in the USA), our model dynamically adjusts premiums to account explicitly for evolving marital and mortality risks, effectively mitigating adverse selection and moral hazard through mechanisms such as waiting periods and return-of-premium clauses. Simulation results indicate actuarially sound and market-viable premiums, highlighting divorce insurance’s potential as a financial tool complementary to existing legal arrangements like prenuptial agreements. Our findings underscore the practical feasibility and invite further exploration into overcoming market acceptance barriers and regulatory challenges.

Keywords: Actuarial modeling; Divorce insurance; Financial protection; Marital risk; Multi-state model; Premium pricing; Risk assessment. (search for similar items in EconPapers)
JEL-codes: C15 D81 G22 G28 J12 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2025
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https://hdl.handle.net/20.500.14352/118899

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