The next investment craze: betting against marriages?

by Nick on April 18, 2012

Nothing like a “betting against marriages” post to liven up a Wednesday morning… Seriously though, I was poking around over at Daily Finance yesterday and noticed an article that I could not resist: could the next big investment craze be hedging marriages?

Essentially, there’s a website that will reimburse you for the cost of a wedding gift (up to $500) if a marriage fails within 3 years (divorce only – no annulments for some reason).

The cost? 8% of the cost of the gift (you must also upload a copy of the receipt – only works with gifts – not cash).

Simple enough, right? Well here’s the problem (or one of the problems), as Daily Finance points out: It’s a flawed model.

The insurance premium of 8% is small enough to entice, but large enough to make it a relatively tough decision. And apparently the whole “credit default swap” secondary market was set up on a similar model. That concept was set up to protect lenders from losing all of their money if a loan failed. But “investors” figured out a way to take out the insurance without lending money – essentially buying insurance policies on loans they didn’t hold. So their cash outlay was significantly lower than if they had to lend money and then buy insurance on top of that.

There’s a similar industry with life insurance, too, with “investors” buying life insurance policies from people they don’t know (hoping they die soon, essentially). They call these “life settlements.” Basically people will pay someone more than the cash surrender value for their policy but less than the insurance amount and hope the person dies soon enough to yield a good return on the money… yeah, kind of creepy, right?

So Daily Finance suggests there’s going to be a secondary market for wedding receipts and that and that “investors” will target party-goers and try and buy their receipts (or copies of receipts, I guess) for a few bucks and hope the marriage ends within three years to pocket the price of the gift with only an 8% (plus cost of receipt) investment.

Pretty crazy, right? Well it’s actually not a terrible idea (assuming you don’t have a problem routing for destruction and heartache…). But aren’t there more ways for abuse?

For example, a fraudster could do things like buying multiple gifts, returning all but one (the “real” gift) and buying insurance so that they could get much more than the price of the gift if the marriage fails. Or the same fraudster could set up a wedding just so he and a few of his friends could score a 92% discount on some really cool stuff, agreeing to divorce in advance.

In an extreme case, “investors” could try and target the marriage, hoping it will fail (like send in a beautiful woman to tempt the guy and have a photographer ready…). Then again, it’s unlikely that the finances of one wedding would justify “messing with the system.” Although 200 people times $500 max gift is a ton of cash ($100,000) that’s a real extreme – 100 people at 100 bucks is only $10,000.

But what do you think? Too far? Too creepy? What else could go wrong?

Ever attend a wedding you didn’t think would last 3 years (other than your own!)? Would you pay 8% for a policy like this?

And what would you do if you found out some of your guests bought a policy in case your marriage failed?

I don’t know. I think I’ll stick with index funds and ETFs. And here’s predicting the company either loses way too much money and folds or it changes its model in response to “shenanigans” (like sending money only to the credit card used to purchase the gift, verifying the number from the receipt and literally sending a payment to the card, or something like that).

Until next time, put your credit card down and slowly step away from the mall!

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{ 40 comments… read them below or add one }

Thad P @ thadthoughts.com April 18, 2012 at 8:43 am

The emotional cost of seeing marriages end (and regardless of what your perspective is on the relative merits of divorce, there is always an emotional cost) makes this whole premise sad to me. Not surprising, but sad.
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Nick April 18, 2012 at 10:05 am

Very sad indeed, Thad. I don’t think I could spring for it and am curious to see how long the company lasts…

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Thad P @ thadthoughts.com April 21, 2012 at 2:14 pm

It is probably a “sure thing” in some ways. Marriages will fail. But still not something I would want to profit from.
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Nick April 24, 2012 at 9:15 pm

Yeah, I’m in the same boat – then again, the 3-year time frame is pretty short…

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Daisy @ Add Vodka April 18, 2012 at 9:02 am

That is.. intense! I guess there are quite a few marriages that don’t last for that long, but it’s a little troubling to me.

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Nick April 18, 2012 at 10:06 am

Isn’t it nuts?!?! Yeah, like Sean says (below) pretty bad Karma betting against a marriage, too. I wonder if there’s a similar one to bet on marriages lasting…
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Sean @ One Smart Dollar April 18, 2012 at 9:15 am

You could never catch me investing in this. Talk about bad Karma :-)
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Nick April 18, 2012 at 10:06 am

I’m with you Sean! I hadn’t even thought of the Karma factor… bad news all around.
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WorkSaveLive April 18, 2012 at 10:04 am

You find some interesting stuff to write about, Nick! I could never fathom actually BETTING on the chances of a marriage failing. How horrible.

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Nick April 18, 2012 at 10:07 am

Haha! Thanks. Doesn’t it feel super creepy just thinking about it? (Incidentally, I hadn’t checked but I wonder whether the company was around when we got married – almost 4 years ago! I wonder if anyone lost money on us…)
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Modest Money April 18, 2012 at 11:29 am

Definitely a creepy way to try to make a buck. Then again, what if you were going to a wedding that you thought would fail for sure? The system does seem very open to abuse though. Like, would they take into account someone who’s been married and divorced many times?
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Nick April 18, 2012 at 12:25 pm

Well I guess that’s where these folks come in. I’m sure some folks who have been invited to weddings where they think “I’ll go, but I don’t get it. They fight all the time” might spend 8% just in case… definitely creepy, but not completely illogical… especially for those people who aren’t concerned with any Karma and feel compelled to go to a wedding for a marriage they feel they “know” is doomed fo fail….

Another good point. I’m definitely curious to see how long this company lasts.
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John @ Married (with Debt) April 18, 2012 at 1:56 pm

People love markets so much that they create them everywhere, even places they don’t belong. I think these people are addicted to money and free markets. This is about as useful as viatical settlements.
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Nick April 18, 2012 at 5:31 pm

Yeah, it’s definitely a little nuts. As if there aren’t enough things to “invest” in (or bet on…), we need to create more and more. Yep – in this case, at least only the marriage dies though… :)
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Thad P @ thadthoughts.com April 21, 2012 at 2:15 pm

I guess this would make it a “no-futures” market?
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Nick April 24, 2012 at 9:14 pm

Haha! You may be in the wrong career Thad!

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Kooz April 18, 2012 at 5:18 pm

I’ve been in and to a lot of weddings, including a few that ended in divorce. None divorced within three years.

What I love about this is the way your twisted mind works–I love all the potential scams you’ve highlighted! I wonder if they’re illegal. If not, let’s have at it!
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Nick April 18, 2012 at 5:32 pm

Haha! Yeah, I was a bit worried about that actually….

I suspect 3 years is a pretty short time frame, but I have no idea.
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BeatingTheIndex April 18, 2012 at 7:56 pm

Talk about creating new grounds for gambling! Might be a good business modelt to find something that is not being gambled on and create a website for it!
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Nick April 19, 2012 at 9:03 am

Seriously there seems to be an insatiable appetite doesn’t there? How about 12.12.12 end of the world insurance? I’m sure someone’s selling it…

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MyMoneyDesign April 18, 2012 at 9:39 pm

Honestly people – just man up and buy some stocks. Really? Insurance policies on failed wedding gifts and people you don’t know dying. Yes. That is creepy ……….
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Nick April 19, 2012 at 9:04 am

Yeah, I’ll stick with my index funds too!

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Michelle April 19, 2012 at 12:10 am

This is a great idea…IF you don’t believe in karma or bad joojoo :/

I have a friend who got married a few years ago and a bunch of our mutual friends wanted to bet on how long they would last. Awful, right? I wouldn’t have anything to do with it.
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Nick April 19, 2012 at 9:06 am

Wow! There may still be time for your friends to insure their gifts…

3 years seems like a pretty short time frame though.

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Well Heeled Blog April 19, 2012 at 10:13 pm

A gift is a gift – freely given and without strings. After I give the gift, I don’t really care what the couple does with it. So it wouldn’t matter to me, financially speaking, if someone else’s marriage ends in 3 months, 3 years, or 30 years.
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Nick April 20, 2012 at 10:19 am

Amen!

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Emily @ evolvingPF April 19, 2012 at 10:21 pm

I have attended a bunch of weddings in the last few years because apparently we’re in that life stage, and only for one of them have I thought that the marriage probably won’t last. I feel so terrible because we love our friend dearly and tried to caution him against getting engaged, but he went ahead with it anyway. But no way would I want insurance on the gift we gave them! It’s still a gift, it doesn’t matter if they ever split up.
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Nick April 20, 2012 at 10:21 am

We had that run – then we had the “first kid” run. Now we’re in the second kid run… So basically, I’m going to a lot of kids’ birthday parties. The next person to say “come’ on you HAVE to have a piece of cake” while attempting to force feed me with a solid black piece of elmo’s nose is going to be wearing it! (Thanks… I needed to get that out…) :)

I’m with you on the gift is a gift too and hope you were all wrong about your buddy!
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Emily @ evolvingPF April 20, 2012 at 4:10 pm

Unfortunately we are not wrong about what is amiss in their relationship – basically different views on a fundamental point of marriage on which they should agree. I hope that our friend will change his views to match his wife’s. We could be wrong about the extent of the impact of this difference on their marriage – actually I really hope we are wrong because I hate divorce. We didn’t want them to get married but now that they are we are all for them making a wonderful (and hopefully harmonious) life together.
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Nick April 20, 2012 at 9:16 pm

Ahhhh. Well that’s unfortunate. Hopefully they’ll come together on it. I’m an internal optimist, so I always think the good will come out.

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Financial Advice for Young Professionals April 19, 2012 at 10:41 pm

This is pretty funny IMO, or sad? This seems ripe for fraud though. I never buy non-mandatory insurance, especially for small things like this. Remember the insurance companies always win, otherwise they raise their rates. Sounds like a lose-lose for me.
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Nick April 20, 2012 at 10:22 am

It’s a little of all three, I think – funny, sad and ripe for fraud! That’s a good point about non-mandatory insurance, too. I’m with you on that.
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MoneySmartGuides April 20, 2012 at 7:33 am

It’s a gift, regardless if the marriage lasts or not. Somehow the meaning of a ‘gift’ is lost in all of this. Regardless if I think a marriage will last or not is irrelevant. I’m not so hard up for money that I need to take out insurance on my gift of $200.
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Nick April 20, 2012 at 10:25 am

Absolutely right, MSA. I’m skeptical that this will catch on, especially with true friends/guests. Maybe there’s something to the “buy the receipt” speculators, but you would think they wouldn’t waste their time trying to convince wedding guests to sell them their receipts for a potential gain of $150. Seems like a lot of work for a chance at a few hundred bucks (or nothing) up to three years from now.
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Matt @ RamblingFever Money April 20, 2012 at 2:36 pm

I definitely see the potential for fraud. That part is scary. As an eternal optimist though, I think the divorce rates are going to decline in a major way. Youngsters of today had to live through the 50% divorce rates of their parents. As a result, they are choosing their lifetime mate more carefully and waiting longer to get married in order to not repeat their parents mistakes. (No stats to support this – just a theory by me)
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Nick April 20, 2012 at 8:54 pm

I like the theory and hope it’s right. Who knows? Maybe it’s a cyclical or generational trend that’s ready to reverse. I know a lot of children from divorced parents who vow to work things out.

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Marissa @ Thirtysixmonths April 20, 2012 at 5:19 pm

I’m bothered by this. I understand that marriages don’t last as long as they did before, but still. This is just wrong.
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Nick April 20, 2012 at 9:17 pm

Yep. Very sad. I’m guessing they don’t last very long…

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SB @ One Cent At A Time April 22, 2012 at 10:58 am

I would like to be the first to start a marriage hedge fund..
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Nick April 24, 2012 at 9:14 pm

Haha! Let me know when it’s up and running :)

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