Happily, ever after?

Since past 4-5 days the social media & tabloids are abuzz with the divorce of a big film star in India.??Just few months back a top global software company chairman also underwent divorce after 27 years of marriage.

Earlier days, the man of the family was earning the bread and providing for all the resources. The women were not that educated and were dependent on their husbands for finances. There was a societal pressure not to get divorced.

The situation evolved over past few years. Due to nuclear families now both spouses are working. Women are becoming financial independent. Divorces are now accepted in society.?

But Divorces can be devastating. Even an amicable divorce can cause financial hardship when you consider the cost of establishing and maintaining two individual households.

When divorce happens, how does the dependent family survive?

There comes the concept of Alimony.

Alimony?is a legal obligation on a person to provide financial support to their spouse before or after marital separation or divorce. The obligation arises from the divorce law or family law of each country.

How is alimony calculated?

There is no fixed formula or hard and fast rule for the calculation of alimony that the husband needs to provide to his wife. The alimony can be provided as a periodical or monthly payment, or as a one-time payment in the form of a lump-sum amount.

If the alimony is being paid on a monthly basis, the?Supreme Court of India has set 25% of the husband’s net monthly salary as the benchmark amount that should be granted to the wife. There is no such benchmark for one-time settlement, but usually, the?amount ranges between 1/5th to 1/3rd of the husband’s net worth.

There are certain factors that are taken into consideration by the court while computing the alimony amount. Such factors may be varied and can include the following:

• Husband’s and wife’s incomes and other properties, if any
• Conduct of both the husband and the wife
• Mandatory deductions such as income tax, EMIs, loan repayments etc. are considered to calculate the net income of the husband
• Liabilities of the husband, such as dependent parents
• Social status and lifestyle of both the parties
• Age and health condition of both the parties
• The period for which the couple had been married
• Expenses for education and upbringing of the child/children

Hence, based on a range of factors, which depend on the specific circumstances and facts of each case, the amount of alimony or sustenance to be granted is decided by the court.

Why Insurance for Alimony:

The risk involved are not new.

Illness, Disability or death of former spouse (who is earning member and is paying the alimony) can cause financial instability to the recipients including former non-earning spouse & dependent children.?

Alimony insurance comes to the rescue in the given conditions.

Alimony insurance’s purpose is to mitigate the risk of incurring significant financial loss caused by divorce proceedings.?

There is annual premium to be paid and a waiting period of 3 to 4 years is applicable for the cover to start.

Huge number of Indians do not have a financial plan or financial literacy. Also, with inflation the alimony amounts are continuously increasing. Children education expenses, regular household expenses management, illness expenses and many unexpected costs need to be addressed: divorce or otherwise.

These types of insurances do exist in USA & few other countries but are yet not available in India.

On a lighter note:?A lot of people don't understand the value of their wives, until a judge decides the alimony amount.

Author is Prabhat Vijh- Director & Principal Officer: iAND Insurance Broker Private Limited