D.I.V.O.R.C.E? I.N.S.U.R.E!

Splitting up is as hard on your pockets as it is on your heart. But a new insurance scheme might help.

A scheme to protect women from falling into a poverty trap during or after divorce action has been set up by a new city firm. The plan, the first to target non-payment of maintenance, provides finance for the legal fees involved in fighting family and matrimonial cases.

A scheme to protect women from falling into a poverty trap during or after divorce action has been set up by a new city firm. The plan, the first to target non-payment of maintenance, provides finance for the legal fees involved in fighting family and matrimonial cases.

A pioneer in its field, Divorce Maintenance Insurance (DMI) has been set up to act as a safety net for the growing number of women who depend on ex-partners to provide for themselves and their children. Instead of turning to the state, they will have access to funds or legal assistance should maintenance payments stop.

Given current statistics - there are around 1 million divorced women in the UK and a further 150,000 get divorced each year, two thirds of whom have children - the divorce maintenance policy could significantly reduce hardship.

"The evidence shows that women and children are more at risk of poverty after divorce than men and, on average, suffer quite substantial declines in household income," says Howard Timmis of Edward Howard Insurance Services, who originated DMI along with Lloyds underwriters, the Kiln group. "The situation worsens dramatically if the former husband suddenly can't, or simply won't, pay the maintenance."

Women whose ex-husbands suffer sickness, redundancy or disability are forced onto state benefit unless or until they are able to support themselves, Mr Timmis explains, as are those whose ex-partners die. Women whose financial lifeline is deliberately cut off are in the same pre- dicament, as well as having to rely on legal aid to get their maintenance orders enforced.

Government agency findings support these facts. A recent report issued by the Legal Aid Board shows that more than 70 per cent of the maintenance cases which it funds are brought by women.

Figures released by the Child Support Agency give even greater cause for concern. Of cases that the agency are called in to handle - and CSA intervention is mandatory wherever a lone parent claims benefit - fewer than half result in the full level of child maintenance being paid. More than 30 per cent of absent parents pay nothing at all towards the upkeep of their offspring.

"The economic consequences of divorce are little less than disastrous for a large percentage of women," says Mr Timmis. "The majority of wives are still at least partially dependant on their husbands so they are bound to come off worst. And one of the biggest problems is that when people split up, they initially tend to have a loose verbal agreement about financial support. This is all very well at the outset, but things can and do suddenly change: perhaps because a new partner has arrived on the scene, or access to the children is being made difficult. And then, of course, money becomes a very effective weapon."

Having seen the lives of a couple of his female friends collapse in these sorts of circumstances, Mr Timmis became acutely aware of the type of deprivation women and children can go through. As an insurance broker, he began devising terms for a new policy to protect separated and divorced women. Ironically, his own marriage broke up before his Divorce Maintenance Insurance was properly formulated.

"Shortly after my own break up, I really regretted that I hadn't already got DMI off the ground," he says. "I had made a financial commitment to my wife, but, after a couple of months, I was made redundant. Suddenly I found myself in a position where I couldn't meet that commitment."

This was the final spur for Timmis, who first threw his energies into making DMI marketable and then approached the Kiln group to underwrite it.

While other financial institutions judged the area too high-risk to touch, Timmis and his colleagues at the Kiln group have found a formula that they claim works. While there is nothing to prevent a man from taking out DMI on behalf of his spouse, the policy is normally set up on a "confidential life" basis, with the wife answering queries about her ex-husband's health and financial status. The one stipulation is that a court order must already be in place.

Once these hurdles are completed, the package provides cover for up to two years' maintenance payments in the case of an ex-husband's accident, sickness or disability, and a lump sum payment of twice the annual amount of maintenance in the case of his death. In the case of involuntary unemployment, the policy allows for up to 12 months' maintenance payments.

But the cover which is likely to generate most interest is that which provides for the payment of up to pounds 12,000 in legal costs and expenses in any action seeking enforcement of a maintenance order.

"In the event of non-payment, the wife will be able to instruct the solicitor of her choice to take immediate action," says Mr Timmis. "This is an important point, as changes to the Legal Aid system will soon mean that she will be restricted to instructing a solicitor who is franchised for legal aid."

Women who are currently faced with filing in the numerous forms involved in Legal Aid applications, followed by a long and tortuous wait for a court date, will welcome this aspect of DMI, as access to real funds will help to put them back in control of the situation.

There is, of course, a caveat. The premium payments may well prove too expensive for those in greatest need of assistance. "A pounds 10,000 per annum maintenance payment will typically cost between pounds 45-pounds 90 per month to insure," says Mr Timmis, "which is a fair rate, but one that could well be beyond the means of the poorest- off. I personally think that payments for insurance policies such as DMI should be built into maintenance orders. This would ensure that this kind of protection was available for all."

The case for this radical change in the law has already been made to the Lord Chancellor's department, with Mr Timmis and his colleagues discussing the details of DMI at a recent meeting with the Family Policy Division.

"The Lord Chancellor's Department is understandably interested in DMI, as it should serve to reduce the tremendous burden on the legal aid fund," says James Stewart, of Stephenson Harwood, London, who helped draft the insurance policy. "The Access to Justice Bill will have tremendous implications for Legal Aid. In a system where the Legal Aid budget will be capped and the grant of Legal Aid discretionary, a wife with the benefit of DMI is secure in the knowledge that the costs of enforcing a maintenance order against a husband who is wilfully refusing to pay will be met by the insurers.

"In my view, judicial intervention is needed to ensure that, when court orders are being made, the premiums payable for DMI and other life policies are considered a reasonable part of the wife's normal budgetary needs," Stewart adds. "Legislation is also needed to give courts the power to order the payment of the premiums on such policies. At the moment, that can only be achieved by negotiation."