Insurance will fund legal battles against former partners who willfully default – and pay out if exes can no longer afford to.
Jenny, a mother of two young girls, has been left with legal bills of more than £9,000 after pursuing her ex-husband for maintenance payments.
After she divorced her husband of five years, Jenny (not her real name) took on the caring responsibility for their two daughters. With a consent order in place, she had no reason to think that he would fail to pay her the agreed £740 a month she needed.
"The split was amicable and I never dreamed that he would default, but he did – less than a year after we split up. He had met someone online and said he now had another family to support," she said.
"Eventually, I decided to take legal action, until he applied for a reduction the correct way. But doing so was extremely expensive and I had to use credit cards to pay the solicitor."
Jenny's experience is by no means unusual. Divorcees relying on maintenance payments from former partners often find themselves struggling financially because their ex is made redundant, becomes ill, dies or simply refuses to pay. While a consent order setting out the division of assets and payment of maintenance is legally binding, in theory meaning both parties can move on financially, it cannot guarantee that maintenance payments will be kept up.
"In today's economic climate we are seeing more and more problems arising from these payments grinding to a halt as a result of redundancy or other problems," he says. "Mothers with children can suffer serious financial hardship, and while they can go back to court to try to enforce the payments with further legal proceedings, this could be costly."
Henry Glasse, the managing director of Maintenance Assist, said: "Our aim is to restore financial security to recipients of maintenance and we also provide a free legal helpline for support. Quite often, for example, the husband will start a second family with another woman and the competing pressures can lead to the maintenance being cut for his first family.
"The proper course of events is for the husband to go back to the court to request a reduction in the maintenance, but often he just stops paying and waits for the ex-wife to take him back to court. With the government actively encouraging individuals to make private arrangements for child maintenance, rather than going through the CSA, we feel our service is what people will be looking for."
The policy is available to people with a legally binding consent order, and premiums are paid monthly with a choice of two packages. The standard package covers lost maintenance for a year while the gold option pays out for 24 months. But it isn't cheap – premiums start from around £16 a month covering monthly maintenance of £300 – a lot for those on the breadline.
However, Ginny Colman, family lawyer at Birketts, believes these policies for protecting income streams post-divorce are becoming a vital tool. "They offer certainty and peace of mind for clients during a vulnerable time, and most clients have already spent significant sums in reaching a financial settlement and they are keen to avoid further distress," she says.
Penston adds: "We have dealt with two cases with clients paying £60 and £100 a month for this policy, both covering £1,500-a-month maintenance payments – but the first policy would pay out for a year if a claim was made, while the second would pay out for two years. The claim would therefore amount to around £36,000, which is a hefty sum and makes the cost worthwhile – covering maintenance payments might be considered a necessity for some people."
The insurance can be factored into the divorce settlement. "The divorcing parties both fill in various forms during the divorce declaring their income, assets and anticipated expenditure," says Glasse.
"So the cost of maintenance insurance can be added to the list of expected outgoings such as household insurance and mortgage costs, and we can give quotations at an early stage so that the cost can be estimated. The wife will often be awarded maintenance for herself based on covering the expenditure listed."
After she divorced her husband of five years, Jenny (not her real name) took on the caring responsibility for their two daughters. With a consent order in place, she had no reason to think that he would fail to pay her the agreed £740 a month she needed.
"The split was amicable and I never dreamed that he would default, but he did – less than a year after we split up. He had met someone online and said he now had another family to support," she said.
"Eventually, I decided to take legal action, until he applied for a reduction the correct way. But doing so was extremely expensive and I had to use credit cards to pay the solicitor."
Jenny's experience is by no means unusual. Divorcees relying on maintenance payments from former partners often find themselves struggling financially because their ex is made redundant, becomes ill, dies or simply refuses to pay. While a consent order setting out the division of assets and payment of maintenance is legally binding, in theory meaning both parties can move on financially, it cannot guarantee that maintenance payments will be kept up.
"A consent order can only be enforced to the extent that an ex-partner has the money to pay the maintenance," says Mark Penston from BlueSky Independent Financial Advisers, a firm that specialises in mediated settlements and divorce.
These problems are compounded by cuts in legal aid and proposed changes to the way the Child Support Agency (CSA) operates, leaving people with little support. The government last year announced plans to scrap legal aid for couples who want to end their marriage. Penston says life cover and sickness benefit can be arranged as part of the divorce settlement so that if an ex-spouse dies or falls ill, maintenance payments continue.
"But this doesn't satisfy all the eventualities that might occur," he says. An insurance policy, called New Start, has been developed to fill this gap. It covers shortfalls in maintenance payments following an ex-spouse being made redundant, dying, or falling ill – and it pays for legal representation to enforce payment where the ex-spouse willfully defaults on payments. It is provided through Maintenance Assist, an insurance broker authorised by the Financial Services Authority.
"The proper course of events is for the husband to go back to the court to request a reduction in the maintenance, but often he just stops paying and waits for the ex-wife to take him back to court. With the government actively encouraging individuals to make private arrangements for child maintenance, rather than going through the CSA, we feel our service is what people will be looking for."
The policy is available to people with a legally binding consent order, and premiums are paid monthly with a choice of two packages. The standard package covers lost maintenance for a year while the gold option pays out for 24 months. But it isn't cheap – premiums start from around £16 a month covering monthly maintenance of £300 – a lot for those on the breadline.
David Allison, the chairman of Resolution, the family lawyers' association, says: "This policy has its place for some people. Maintenance payments often stop because of temporary financial difficulties or the person simply being difficult – and this would cover for the period while steps are taken to resolve this. But it can be quite expensive, and we often factor life insurance into maintenance payments so that payments would be covered if the maintenance payer dies."
Penston adds: "We have dealt with two cases with clients paying £60 and £100 a month for this policy, both covering £1,500-a-month maintenance payments – but the first policy would pay out for a year if a claim was made, while the second would pay out for two years. The claim would therefore amount to around £36,000, which is a hefty sum and makes the cost worthwhile – covering maintenance payments might be considered a necessity for some people."
The insurance can be factored into the divorce settlement. "The divorcing parties both fill in various forms during the divorce declaring their income, assets and anticipated expenditure," says Glasse.
"So the cost of maintenance insurance can be added to the list of expected outgoings such as household insurance and mortgage costs, and we can give quotations at an early stage so that the cost can be estimated. The wife will often be awarded maintenance for herself based on covering the expenditure listed."
For information on New Start contact Maintenance Assist on 01449 798163. For impartial advice on court orders for maintenance, contact Child Maintenance Options on 0800 988 0988. To contact the Child Support Agency, call 08457 133133.
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