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Why Buy Companion Life Insurance?
Article 7 of 12 in Is Life Insurance Right For Me?
The idea that life insurance is only for married couples is far fetched. Life insurance for couples is important regardless of marital status because partners depend on one another. The easiest way to get companion life insurance for your partner is to purchase a plan and name them as your beneficiary. That way, your partner will be taken care of financially by your life insurance policy. If you want to take out a policy on your partner or establish a joint life insurance policy, you will need to take extra steps before you can purchase a policy.
Life Insurance on Your Partner's Life
If you are in a non married partnership, there are restrictions on purchasing life insurance on someone that you are not legally married to or is a relative. Purchasing life insurance on someone else requires something called insurable interest. A person has an insurable interest in someone when the loss of that person would cause the other to suffer a financial loss or certain other kinds of losses. There is usually a requirement that the applicant for life insurance has an insurable interest in the life on which he is placing that insurance.
For a married spouse or a business partner, insurable interest is obvious. But for individuals that are not married, it may not be so clear. Therefore, if you are in a non married partnership, you will need to be able to produce evidence that you depend on your partner financially. You will likely need your partner to sign a statement saying that you are allowed to take out the policy on their life because you have an insurable interest.
If you have any questions about taking out a life insurance policy on your partner, ask an insurance agent for assistance.
Joint Life Insurance and Survivorship Policies
Joint life insurance and survivor policies are two common forms of companion life insurance that allow you and your partner to take out a policy covering both of you.
- A joint life insurance policy could provide life insurance for both partners in one policy. It would cover both individuals and you would have the ability to name each other as beneficiaries. The policy usually pays only on the first to die, so the surviving partner would typically be the beneficiary.
- A survivorship life policy is similar to joint life in that it insures two or more people for a premium based on their joint age. However, survivorship life pays a death benefit out only on the last death, unlike joint life which pays a death benefit only on the first one. Since the death benefit is not paid until the last insured dies, the life expectancy for the policy is longer and the premium is lower. Survivorship policies are popular for many situations. Often, couples or non married partners who are retired and do not rely on each other for income will buy a survivorship policy to help their children with estate taxes.
TIP: You do not necessarily have to choose between the two as you can get two life insurance policies if you are willing to pay for both. If you need assistance selecting a joint or a survival life insurance policy, contact an experienced agent who can walk you through your selection.
Common Law Marriage and Life Insurance
It's possible for a common law spouse to receive life insurance death benefits when no beneficiary is named on the policy if the common law spouse is the executor of the deceased's estate. As the executor of the estate, the common law spouse would be required to settle all debts and then could allocate any remaining assets according to the will. If there is no will, the common law spouse could allocate the assets as they see fit.
If you live in a state that recognizes common law marriages and are in a relationship that is recognized by common law regulations, you should be able to get a spouse rider to your insurance policy. If you do not live in a common law state or are in a domestic partnership that is not recognized under common law regulations, then the answer will depend on the life insurance company you choose. Some have domestic partner riders that are similar to spouse riders. Because legal authorities in your state do not always recognize a domestic partnership, you may have to prove joint assets in order to get the rider.
There are currently only 13 states that recognize long-term domestic cohabitation as a common law marriage although some others have grandfathered it in. Iowa is currently the only state that recognizes same-sex domestic partnerships as possible common-law marriages, as long as the relationship meets the other required tests. Each state has its own tests, so you need to check with your state for details, but generally they include certain age restrictions, ability to give consent and cohabitation details.
Your Partner as Owner of Your Policy
It can be difficult to ensure that your domestic partner has the ownership rights to your assets. That is why making a domestic partner the owner of your life insurance policy can be very useful. In order to do this, you may need to send a letter to the underwriter along with your application explaining your relationship and the reasons that you would like your partner to own your life insurance policy. Be sure to remember that, as the owner, your domestic partner will have the right to makes changes to the policy as they wish. If your relationship ends, you will no longer have a say over who is appointed the owner or beneficiary of your policy because your partner, as policy owner, can assign ownership to anyone and can name anyone as beneficiary.
Life insurance for a non married couple is important, especially if you have assets and children together. When you are ready to purchase a life insurance policy, analyze the needs of you and your partner, choose the best kind of plan (joint life insurance, term life insurance, cash value life, etc), and start shopping for quotes to compare. Take advantage of the Free Advice life insurance quote center to help you get started.
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