The Divorce industry
India’s alimony industry opportunity is estimated to be a minimum of Rs. 2.04 lakh crore and insurance companies are ready to cash in on the opportunity in the name of Divorce Insurance or Alimony Insurance. In a report published under the Economy section of business site Moneycontrol.com it showed that is there are 1.36 M divorced people in India (Census 2011) then on an average if there is 15 lakh alimony paid per divorce then the industry opportunity is 2.04 lakh crore.
This article also clarifies that in last 5-7 years, India’s divorce rates have risen by 35% (not sure how they got this data), and with this increase, India’s (read Indian men’s) need of alimony insurance is increasing. The yearly premium is pitched at Rs 15000 or less for 25 -30 lakh (2.5 – 3 million) cover. A big caveat to such insurances is – ‘There is usually an initial period of 2/3 years during which the claim is not admissible”. So, if there is a divorce during the first 2-3 years (which is the case in most divorces), then the husband will not get any insurance amount.
However, before I delve into the topic, I would like to mention that the above calculation may be wrong. It considers the whole population of divorced people (men, women included) and considers even poor people or divorces settled for no alimony. It should have considered only the male divorced population and people above a certain income level to begin with.
Misandry in Alimony Insurance
The very concept of alimony insurance is misandrist in nature. It is like forcing a man to pay a premium and gather money for his wife who can leave him anytime and demand the money. It is like giving women money easily simply on divorce.
Now, I am sure many of you are thinking that the idea of an insurance cover is much better for men and at least they will need to incur less loss when their marriage breaks down, compared to men without this insurance cover. Even if we consider divorce after three years of marriage, the man would have shelled out hardly 45-50 K for premium but would get up to 25-30 lakhs as a payout. So, overall he remains a gainer in this transaction.
But this is nothing but giving easy money to women. First of all the proposition is not to force the woman to contribute to the premium. Even if it is made mandatory, it will always be the husband who would pay the premium (wife’s part of the premium as well if the wife needs to pay any). So, thinking of such insurance is nothing but telling women of the easy money they would get on divorce.
There is also no guarantee that a woman would limit her alimony claims to 25-30 lakhs only. If today even ordinary women can ask for Rs 1 crore plus as alimony and there is no upper limit of alimony claim, then how can anyone be sure to keep it in check. So, if a man thinks that alimony insurance cover will ever help reduce the financial burden on him, that is wrong. Post-implementation of divorce insurance, women will simply add this Rs 25 – 30 lakh (or whatever sum assured that man gets) to her claim amount and start from there. So, if under normal circumstances she demands 50 lakhs alimony, a man with divorce insurance will surely get a claim of 75 lakhs. Women will take this money for granted.
Problem is also in the whole concept of alimony/divorce insurance (or any such concepts where a man is told that he needs to pay to his wife and a woman is told that she is going to be paid on divorce) is a misandrist concept that is biased against men. That doesn’t consider a whole lot of other factors that should be considered while deciding alimony. Like for instance her contribution to marriage or her willingness to stay in marriage etc.
So, the introduction of a divorce insurance or alimony insurance will not make things easier for men but will make things more complex and terrible for them. More and more women will file for divorce to get this easy money and families will fall apart.
Alimony and Tax
This article from a KPMG India partner explains the tax components of alimony existing at that time. However, if we understand these points, we will understand the present situation.
The article says, that alimony is not specifically earmarked as ‘Income’ under the Income Tax Act, 1961. This further elaborates that a ‘Capital Receipt’ is NON-taxable whereas a ‘Revenue Receipt’ is taxable.
Now we need to understand the concepts of ‘Capital Receipt’ and ‘Revenue Receipt’ here.
Capital Receipt is a non-recurring income that creates liability or reduces asset. It’s like you take money to pay off a debt. Now you need to return this money later and hence this incoming money is a liability for you.
Revenue receipts, on the other hand, is the money received as profit.
In an old Mumbai HC order as mentioned in the above article, it was said that Monthly maintenance is a recurring income for a woman which is a Revenue Receipt and hence should be taxable. However, alimony which is a non-recurring income by a woman is a Capital Receipt and hence not taxable.
It is, however, unfortunate to note that the husband paying maintenance doesn’t get any tax benefit for either paying maintenance (monthly payout) or for paying alimony (one-time payout).
A Better Form of Divorce Insurance
So far only in Egypt, it is mandatory to have divorce insurance before one gets married. But the problem is why insurance needed for paying alimony in the first place? Why can’t couples just peacefully get divorced?
While the legal system will keep this high expenditure of divorce alive and people will continue to get highly-priced divorces, the idea of divorce insurance can be made better.
Since we are talking about safety and security of the low earning spouse (read wife) from the eventuality of a divorce, why can’t the spouse who is afraid of his/her safety after divorce, gets such an insurance and pays premium for the same, instead of putting the burden on the high-income spouse read husband)? That way, the low-income spouse will never be a burden on the other.
The high-income spouse takes care of the family during good times. So, when they part ways, it is unjustified to ask the same spouse to continue taking care of the other spouse. It is because he (yes husband is the higher-earning spouse) may be earning more because of his qualification and experience and his wife does not have any contribution to that. We can keep the feminist bullshit of wife taking care of family and helping husband earn more etc. aside. This is because today most women don’t take care of their family like the way they used to do. Today they have multiple maids and even husbands take care of a lot of household work. So, a woman should not be made a burden on the husband.
The low-income spouse should take care of herself from the beginning or have enough savings so that her future is saved rather than being a burden on someone else. If the insurance policies are made like that then a husband’s liability of paying alimony to his wife can be eliminated. After all, if we really believe that men and women are equal, then one can’t be burdened with the responsibility of other’s alimony.
Any form of guaranteed money on divorce is a bad concept. That needs to be highly dependent on one’s past behaviour. It needs to be considered what would have happened to a person is s/he was not married. One’s future would depend on one past behaviour. Guaranteed alimony will take away that urge to behave properly in a marriage. That is why any insurance on divorce in the name of alimony insurance is a bad concept and a misandrist one.