Separation Shield or Love Insurance - Why Enter into a Financial Agreement? - JHK Legal Commercial Lawyers

12 February 2024

Separation Shield or Love Insurance – Why Enter into a Financial Agreement?

Written by Jitesh Billimoria

Love Insurance or Separation Shield – What is this? How do you get it? Should you have it?

Insurances such as life insurance, motor vehicle insurance, building and/or contents insurance, disability insurance, and income protection are often pivotal to life’s circumstances. But where does “Love Insurance” come into the mix you may ask?

This is an intriguing question that a lot of people don’t consider but when they do, it is often too late – regret follows in hindsight and that regret is, “I should have considered getting Love Insurance“.

What is a Financial Agreement?

As American statesman, Benjamin Franklin once stated “in this world, nothing is certain except death and taxes”.

In Australia, the divorce rate averages between 40-45%, and as such, it is quite likely that you either know of someone who has divorced or you yourself may have experienced such. This rate does not include the breakdown of de-facto relationships either.

We have insurance for a variety of circumstances, in which we may not benefit but beneficiaries will. So then, why do we overlook the necessity for Love Insurance?

Isn’t protection, just like other insurance, a calculated risk, better than cure?

You should be asking then why don’t I have a ‘Separation Shield’ as my protection mechanism?

It is often believed when in a relationship that if you don’t have a substantial portfolio of assets, then a Prenuptial Agreement or Financial Agreement is not necessary. To the contrary, such Agreement can be vital in clarifying financial expectations, roles and debts, and responsibilities within a relationship. Even more so in these times, where breakdown of relationships are more prevalent and where parties leave relationships in a greater hurry compared to our parents’ generation.

Financial Agreements are designed to protect parties who are either considering marriage or are in a marriage. Similarly, those entering into a de-facto relationship or who are in one can also utilise this type of Agreement.

Why a Financial Agreement Could be Important

Over the last two decades, as people are entering matrimonial or de-facto relationships later in life, they have more assets that need protecting. Some even have to consider children from previous relationships when they enter into new relationships.

Understandably, whilst the thought of having to discuss one’s financial circumstances with a loved one may feel uncomfortable, it is essential in terms of establishing trust and transparency between the parties from the onset.

A breakdown in a relationship is often coupled with huge emotional and financial costs, and particularly if that breakdown leads to litigation. Having a Financial Agreement in place ensures clarity in respect of who owns what, when and how. It brings peace of mind that assets of both parties are protected where possible and there are clear intentions, which can reduce worry and confusion.

It captures the essence of the parties’ financial circumstances in terms of what assets, liabilities and financial resources each party brings to the relationship and accommodates any inheritance either party has received or is likely to receive.

For example, if a party has received a significant inheritance prior to commencement of the relationship, the Agreement can record and protect that inheritance from becoming joint relationship property in the event of a breakdown.

Similarly, if a party receives a significant inheritance during a relationship, would the receiving part want that inheritance available for division between the parties in the event of a separation or rather have it protected? We know most, if not all, would say that it be protected. However, if there is no ‘Love Insurance’ or a ‘Separation Shield’, then that inheritance will not be protected.

One can also deal with a number of different items in the Agreement, including: businesses, properties, spousal maintenance, superannuation, and collections (wine, shoes, classic cars, memorabilia, and other specific items). Significantly detailed Agreements can potentially highlight who pays what household expenses, how any joint-named real estate shall be purchased and dealt with at separation, and in the instance of blended family arrangements, who would pay for the damage to the property by one’s child/children.

It should be noted that each party will be required to seek independent legal advice if they are to enter into an Agreement.

For More Information

Having now read a little about ‘Love Insurance’, if you haven’t got such insurance in place and would be interested in discussing further, please contact our office on (07) 3859 4500 or via to arrange a confidential discussion as to how we can help you put appropriate steps in place.