Company Offers ‘Divorce Insurance’

A New Jersey insurance company has come up with a novel product--dubbed “divorce insurance”--geared to ensure a stable family income, even when that family no longer lives under the same roof.

Technically, the insurance would more accurately be called alimony or child-support insurance. Policies issued by Beitler Services Inc. of Lyndhurst, N.J., guarantee that alimony and child support payments will continue for up to six months should the spouse making the payments become unemployed.

“Ultimately it’s a benefit for children and women because 93% of the recipients of child support are women,” said Robert Lipkin, Beitler vice president of marketing.

To get coverage, either party in a divorce would pay 5% of the annual support obligation to Beitler as a premium--or the cost could be shared.

If the spouse paying the support becomes unemployed, Beitler would send checks directly to the supported spouse, provided the unemployed spouse is receiving state unemployment insurance benefits.

The policies are being offered nationwide by Beitler and underwritten by New Jersey-based Homestead Insurance Co.

“What we’re trying to do is create an income stream and get it into the right hands,” Lipkin said.

Los Angeles family law attorney Patricia Phillips said families are usually stretched thin financially by divorce but that the policy could help in certain cases.

Other family law and consumer advocates were less than enamored of the idea.

Donna Hershkowitz, a staff attorney at the Harriet Buhai Center for Family Law in Los Angeles, said she thought the insurance would be a good idea if it were extended to cover more situations--such as nonpayment of support in general, not just for unemployment.

Only 25% of those entitled to child support receive the full amount now, she said. Such odds for a broader insurance policy would probably mean a majority of policyholders would make claims and thus make such coverage uneconomical. “It’s not Christmas, it’s just insurance,” Lipkin said.

More generally, Hershkowitz objects to the idea on philosophical grounds.

“What makes me cringe about the idea is it’s almost like saying, ‘I’m not responsible during hard times,’ ” she said. “It’s as if [the spouse making payments] doesn’t have to make the effort to figure out how to give the children something.”

Abby Leibman, executive director of the California Women’s Law Center in Los Angeles, said she believes that most men would object to paying the insurance premium and that women would end up making payments to cover an individual over whom they have little control. Further, in such a situation women would be paying 5% of the money needed to support themselves and their children.

“If she’s going to be doing this every year, she’s not going to be at 100% capacity of what her needs are,” Leibman said. “In a short period of time, it wouldn’t be very valuable to her at all.”

However, Beitler executives say, the insurance would normally be bought as part of the divorce settlement process and thus presumably be figured into the overall needs of each spouse.

Belen Vargas, a legal assistant at the center, said the insurance appears too costly for the benefits received.

“Most men do not pay their child support, and now to think they would pay extra money to ensure this?” Vargas said. “In the real world, I just don’t see it happening.”

Ken McEldowney, executive director of Consumer Action, a consumer education and advocacy organization in San Francisco, said the insurance does not appear to be cost-effective.