Many couples think they won’t need life insurance until they get married and start a family. But that’s not always the case: often, unmarried people who live together also need insurance to ensure the financial stability of their partner if one of them dies.
If you’re part of an unmarried couple, you should consider whether you need life insurance. Almost without realizing it, your obligations and belongings can become intertwined in a relationship. Eventually, there will come a point when you'll need an instrument to protect your union if anything happens to you or your partner, regardless of whether you are married. One of the quickest ways of achieving this is through a policy that insures both partners. However, it’s not always easy to acquire if you’re not legally married. 
In this article, we will explain the implications that being an unmarried couple can have on life insurance. Keep reading and assess any needs that might arise in your situation.
Life Insurance for Unmarried Couples: Article Contents
Unmarried Couples: Why Do They Need Insurance?
In the United States, it has become more and more common for couples to live together even though they are not married. In fact, statistics say that three out of four American women have lived with a partner without being married before age 30. Data also tell us that unmarried couples are more common than married ones as “first unions”-- meaning that people tend to live together first before getting married.
This surge in unmarried couples has created new situations that society needs to consider, from health coverage to children’s education to life insurance. Everything needs to be adapted to the new family model, which no longer implies a wedding.
In the case of life insurance, most people tend to postpone their decision to buy a policy until marriage. But as marriage is pushed further and further back, we need to change our way of thinking and plan ways to protect partners should tragedy strike. Life insurance for unmarried couples has become a necessary tool.
With a life insurance policy, a couple can protect their joint assets, such as a house with a mortgage. It can also provide a safety net for increased confidence during pregnancy, or ensure the wellbeing of their children. Additionally, it can generate and protect future savings, or cover any joint debts.
There are many reasons for unmarried couples to purchase life insurance covering both partners, but in general, just having joint financial or economic interests is enough to make life insurance useful and even necessary. These factors are what the insurance industry calls an insurable interest. That means that the death of a member of the couple would seriously harm the other. An insurable interest is presumed to exist between married couples, but sometimes must be proven for unmarried ones.
And remember, there are even more advantages if the couple is young: insurance is much less expensive for younger people. If the couple is in their twenties or even thirties, they will pay less for their policies. This is because young people are generally healthy and have longer life expectancies, so insurers assume less risk and can offer them reduced prices.
How to Set Up Insurance for an Unmarried Couple
As we’ve seen, the problem unmarried couples face is getting insurers to allow them to purchase insurance that will include a person they just started living with and are not legally bound to. This is why it’s necessary to prove this insurable interest, so the company can equate partnership with a traditional marriage. Some partners might also want to buy insurance for the other partner. In principle, that’s easier said than done: they will need the consent of the person who will be insured and, again, they will have to prove the insurable interest.
To demonstrate this interest, unmarried couples should be living together and prove that one of the parties is financially dependent on the other to the extent that it is possible. Further, it is important to set up the life insurance policy so that coverage is crossed. This can be done in two ways:
- Selecting the other partner as the beneficiary. In the simplest version, each partner takes out a life insurance policy as the insured. They then name the other partner as the beneficiary of the payout. This is how life insurance is traditionally used.
- Taking out a policy in the other partner’s name. In this more complex version, each partner takes out and pays an insurance policy that names the other partner as the insured. The insured then names their partner as the beneficiary. This set-up guarantees that the policy will remain in effect even if the couple breaks up, because the person who took out and pays the premiums on the policy is and will continue to be the policy’s beneficiary.
Another interesting alternative to protect your partner with insurance is to name your estate as the life insurance beneficiary. You must then have a will that determines how this money will be distributed. That being said, remember that this procedure has consequences: it might delay the time it takes for your heirs to access the money, because estates have to jump through many legal hoops in the United States.
What’s the Best Insurance for Unmarried Couples?
One of the best solutions for partners is joint universal life insurance. This is one of the least known types of universal insurance, which is itself a variant of permanent insurance.
With joint universal insurance, the insured can include their partner on their policy for just a bit more money. This way, the other party will receive the payout regardless of who dies.
Typically, there are two types of joint universal insurance: first-to-die and second-to-die. In the first case, when one of the partners dies, the other will receive the payout. In second-to-die policies, the benefit is released when the last member of the couple dies; in this case, the beneficiaries are other people (children or others).
There are many advantages to this type of policy. The first is its affordability: it’s always better than paying for two policies. What’s more, since two people are insured, the risk is diluted. This will make the qualification process much easier. There are also tax benefits for the couple.
This dual coverage can also be obtained through riders that allow you to change a life insurance policy (typically permanent insurance) that you already have. This method is quick, but again requires proof of the insurable interest and express consent.
Another practical and affordable option for unmarried couples, who are generally younger and have lower incomes, is term or temporary life insurance. Term insurance policies are taken out for a set period of time: 5, 10, 15, 20, or 25 years, for example. This coverage acts as a safeguard during any complicated periods, such as your children’s younger years, a financial rough patch, etc. Then, if your partner agrees and your income improves, term insurance has a huge advantage: it can be transformed into permanent insurance without having to go through qualification.
As you can see, getting life insurance as an unmarried couple can be difficult. Domestic partnerships, common-law partners, and couples who are engaged will encounter less hurdles. However, couples who simply live together but are not officially registered will have to put in a bit more effort. Couples who don’t live together will encounter even more difficulties.
If you are part of a couple that is not legally married, you should explore your options for getting life insurance. You’ll find one that will fit your needs and your lifestyle.
