Life Insurance for Same-Sex Couples [2023]

Photo by Greg Raines on Unsplash

It’s not just Facebook that wants to know your relationship status. Life insurance companies do, too. It’s only been a few years since the U.S. Supreme Court made same-sex marriage legal in all 50 states. A report by Gallup found that just over 10% of LGBTQ couples are married, and nearly 7% live with their partners. People in relationships of all kinds want to plan for major life events and protect their families from setbacks. One popular way to accomplish that is with a term life insurance policy. Your sexual orientation doesn’t impact your eligibility for a policy or how much coverage you can purchase. But your marital status could pose some other issues — let’s talk about insurable interest.

What is Insurable Interest in Life Insurance?

Not just anyone can be the beneficiary of your policy. Life insurance is intended to provide financial assistance to your loved ones, but only to those who have an insurable interest on the insured (the person who is covered by the policy). Your beneficiaries are people in your life who would suffer a financial loss or other hardship in the event of your death. If you’re legally married and have life insurance coverage, you probably designated your spouse as your beneficiary, as completely expected. But if you’re single or unmarried, you might have some questions from underwriting when it comes to who to name as your beneficiaries.

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Life Insurance Beneficiaries of Same-Sex Couples

Just because you’re not legally married doesn’t mean you can’t name your significant other or non-biological children as your beneficiaries. It just means that after submitting an application for life insurance, underwriting may see your marital status and ask additional questions. See guidelines here: life insurance underwriting guidelines. Be prepared to answer the following:

1. What is the beneficiary’s relationship to the insured (you)?
2. How is the beneficiary financially dependent on the insured?
3. How would the beneficiary suffer financially in the event of the insured’s death?

This applies to all applicants of life insurance policies — not just same-sex couples. Individuals who want to name their nieces and nephews as beneficiaries (or other non-relatives) may get asked these same questions by underwriting, too. There are exceptions, like when designating a charity or trust as your beneficiary. These are separate and handled differently in the eyes of life insurance companies.

Why Does Insurable Interest Matter?

Your home insurance carrier doesn’t want you to intentionally set your house on fire for insurance money. That’s insurance fraud and bad for a variety of other non-insurance reasons. It’s the same idea with life insurance, except this is to protect you against any harmful act. This is also why someone can’t take out a life insurance policy on you without your consent. It’s a good thing, however annoying it may be during the life insurance application process.

Who Can Be Your Beneficiary?

Your beneficiaries would experience a financial loss or other hardship in the event of your death — thus, the reason you’re buying a life insurance policy in the first place. However, you may also be required to justify your named beneficiaries. 

Couples should have joint life insurance to provide financial security and protection for their family in the event of either partner’s death, ensuring that the surviving spouse or dependents can maintain their lifestyle and cover expenses without undue financial strain. Additionally, joint life insurance can often be more cost-effective than purchasing separate policies for each partner.

Read More: Why should couples have joint life insurance?

Domestic Partners

Marriage is a personal decision and not something that everyone wants to jump into. If you have a partner, you’ll likely be able to designate them as your beneficiary if you share a home and life together. Are you in a relationship but live very independently from each other? You must be able to justify the reason why your partner may suffer a financial loss should you pass away.

Children

Biological and legally adopted children are almost expected to be beneficiaries these days. Yes, there are additional considerations for any minor children, but it’s understandable why any parent would want to leave behind a financial payout to take care of their children. Blended families might have additional questions, since there may be others who take on the full responsibility of raising children. If you’re naming foster children or soon-to-be-adopted children, you’ll likely also have to answer some questions or provide documentation to underwriting.

Other Relatives

Many people consider designating their parents or in-laws as beneficiaries on their life insurance policy. This makes sense if you cover major expenses or handle caregiving responsibilities. Again, be ready to give underwriting information on how they are dependent on you. Are you planning to leave behind a gift to your niece or nephew? You might have to find another way if you’re insurance carrier doesn’t believe they have an insurable interest. Unless you regularly provide financial assistance, a life insurance policy may not be the best option for this.

Friends

In some cases, you may well indeed be caring for a friend and be financially responsible for them. But if you just want to leave a little something extra for them to enjoy after you’re gone, you’ll have to plan for that in another way.

Case Studies: Life Insurance for Same-Sex Couples

Case Study 1: Protecting a Partner’s Financial Future

Alex and Jamie, a same-sex couple in a committed relationship, decided to purchase life insurance to protect each other’s financial well-being. Although they were unmarried, they recognized the importance of providing financial support in the event of one partner’s death.

Alex and Jamie named each other as beneficiaries on their respective life insurance policies, ensuring that the surviving partner would receive the death benefit and have the necessary funds to maintain their lifestyle and cover any financial obligations.

Case Study 2: Securing Financial Stability for a Blended Family

Sarah and Emily, a same-sex couple who recently blended their families, understood the importance of life insurance in providing financial stability for their children. They decided to purchase a joint life insurance policy that would cover both of them.

In the event of the first partner’s death, the surviving partner would receive the death benefit, providing financial support for the entire family. Sarah and Emily recognized the unique needs of their blended family and took proactive steps to ensure their children’s future well-being.

Case Study 3: Supporting a Non-Biological Child

Mark and Chris, a same-sex couple, had been raising a child together who was not biologically related to either of them. They wanted to ensure that their child would be financially protected if anything were to happen to them.

Mark and Chris named their child as the beneficiary on their life insurance policies, providing a safety net and financial support for their child’s future. By taking this step, they reassured themselves that their child would be taken care of, regardless of the legal or biological relationship.

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Bottom Line

Your love will not make an impact on your ability to get a life insurance policy. But if you don’t have a wedding ring, you’ll likely be asked to do a bit more homework for your insurance company. Remember, this isn’t personal! It’s just an extra measure of protection for you and your loved ones.

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