Divorce Insurance: A Simulation-Based Framework for Short-Term Financial Protection in Marital Dissolution

Divorce is a critical family transition that can trigger acute financial hardship, particularly for women and socioeconomically vulnerable households. Legal costs, relocation, and temporary income instability often arise before longer-term settlements, while existing support mechanisms provide only partial protection. This paper develops a simulation-based probabilistic framework to assess the actuarial feasibility of short-term divorce insurance. Moving beyond the WedLock precedent and its flat premiums, a multi-state actuarial model translates verifiable characteristics—including age at marriage, cohabitation history, income asymmetry, and previous divorce—into policyholder risk-adjusted premiums. Results show that lump-sum contracts can be actuarially coherent across heterogeneous risk profiles when pricing is set at policy inception and no-claim rewards, including return-of-premium clauses, are carefully calibrated to mitigate adverse selection and moral hazard. Divorce insurance is therefore conceptualized strictly as transitional liquidity protection, not as a remedy for the structural economic inequalities of marital breakdown. Implementation would require gross-premium modeling, institutional adaptation, social acceptance, and careful management of a central behavioral ambivalence: alleviating immediate financial distress without creating unintended incentives for marital dissolution.