There is no denying that the consequences of the pandemic have left massive ripples in our society. Millions of lives are lost, businesses are closing, travel and tourism are at a standstill, retirement accounts are leaking like rusty buckets. But perhaps one of the biggest collateral damages as a result of Covid is the marked increase in divorces, driven by disagreements over restrictions, vaccinations, the loss of loved ones and couples suddenly finding themselves in a shrinking world to indulge in work and school home. When suddenly a 2,400-square-foot, three-bedroom house feels like living in a brig.
“Marital conflict has definitely increased since the pandemic. I have noticed an increase in the number of clients seeking a divorce. I get three to four requests a day for my services, while pre-Covid requests were a lot fewer,” New York City divorce attorney Lisa Beth Older told CNBC.
“When the pandemic first hit … there was a slowdown in divorce rates. People were trying to figure out what was going on and how to sort out their lives,” said Atlanta-based family attorney Elizabeth Lindsey, current president of the American Academy of Matrimonial Lawyers (AAML), a group of more than 1,500 family attorneys across the 50 states . “While the pandemic has been going on, every family law attorney I know has been very busy,” Lindsey quoted as saying in an interview with The Atlanta Journal-Constitution.
Of course, divorce has happened in all economic situations, but when it comes to law firm partners, investment firm CEOs, orthopedic surgeons, and the expensive nip-and-tuck specialists from Beverly Hills to Park Avenue, monthly child support and child support payments can easily run into five figures .
It is not uncommon for divorce contracts to include life insurance in the wording. But it’s more likely — some reports say four times more likely — that someone will become disabled and be unable to make those future payments. So here we find a gap that needs to be filled. Either the sponsor or the sponsor can take out a policy, but more often than not the attorney representing the sponsor will require that the sponsor be covered by a disability policy before entering into the divorce settlement.
Now, if the supporter becomes disabled and can no longer meet their monthly obligations, a judge can reduce or eliminate those alimony payments. However, this leaves the supported spouse and children in a vulnerable position. A 45-year-old anesthesiologist had to pay her ex-husband $10,000 a month for five years. However, after just six months, the anesthesiologist became unable to work and, due to her inability to work, was unable to make the required maintenance payments. Luckily there was a workaround. During the divorce proceedings, a child support disability policy was inserted by the insurance agent, which protected alimony payments and provided the ex-husband with a benefit of $10,000 per month for four and a half years to meet the remainder of the agreement.
The premium for such a product depends on age, occupation (the more risky, the more expensive) and income as well as any other contractual obligations. And very often the new monthly alimony equals the monthly benefit.
Here’s a perfect example of consultants with entertainment clients: A 32-year-old singer had to pay $50,000 a month in child support to a mother and her 8-year-old son. After developing vocal nodules, he required surgery, which caused further permanent damage and ended his singing career. This brought into play a child support policy for the disabled, which provided a benefit of $50,000 per month for 10 years to make child support payments.
The sponsored party might be indirectly protected by traditional disability insurance, but the sponsor (aka the insured) is not required to use those benefits for the sponsorship arrangement and could still receive a reduction/stop in payments. Fortunately, through the resources of Lloyd’s of London, a consultant can access this product for their clients. What counselors can do when such a situation arises with their high-earning clients is to include a disability protection tab in the divorce settlement that will maintain payments if a severe disability threatens to be cut off, or drastically reduce monthly payments. Such coverage is tailored to an individual’s unique profile and goes well beyond what traditional insurers can offer.
Bottom Line: Don’t let an unexpected disability get your customers into trouble.