From
Your Perspective:
Financial planning for nontraditional
couples
Insurance considerations
If your partner is dependent on you, or if your family needs both your incomes to pay the
mortgage,
to raise any children you have, or just to meet the ordinary costs of
living, life insurance may be essential for your financial plan. It’s
one sure way to establish financial security for the surviving partner
if one of you should die.
Insurable interest
There
could be a problem when buying life insurance to protect unmarried
partners, however. For one person to own a life insurance policy on
another, there must be what’s called an insurable interest: a
legitimate reason to insure that person’s life. These laws prevent
people from speculating on the lives of others by buying insurance
policies on people they have no financial stake in. It is possible that
nontraditional unmarried partners who want to buy policies on each
other’s lives may find an insurance company refuses, arguing that the
applicants lack insurable interest in each other.
You do have an insurable interest in each other if you own a home
together or are business partners. Otherwise, you may need to get
around the insurable interest requirement some other way. The most
straightforward solution is for each of you to own a policy on your own
life and name your partner as
beneficiary.
More and more insurance
companies are becoming sensitive to the needs of nontraditional
families. So if you have difficulty getting a policy from
one insurer, you can always try another.
