Unmarried couples living together has become a virtually normal state of affairs in the US in recent years. It has become so common now that financial considerations need to be dealt with that are not at all unlike those faced by married couples. One of them is life insurance. How difficult is it for unmarried couples to get life insurance?
Not nearly as difficult as it used to be.
How common is it for couples to live together without being married?
According to a study by the Centers for Disease Control and Prevention, couples living together are more common as “first unions” than marriage is. In fact, only 23% of first unions are by married couples. The rest, we can presume, are unmarried couples living together. And at least 40% of those cohabitation arrangements will eventually lead to marriage. Cohabitation, it seems, has become an accepted interim step on the way toward marriage.
How does that affect the ability of unmarried couples living together to get life insurance for one another?
An insurable interest must exist
As is the case with virtually any other type of insurance – on any person – it must be established that there is an insurable interest between the parties. That means that one or both parties will be negatively affected by the loss of financial contribution from the other. An insurable interest between unmarried couples living together is more common than not.
While insurable interest is presumed to exist between married couples, it sometimes has to be proven to the insurance company when it comes to unmarried couples living together. This can be proven simply by having legal documents that establish joint liability or ownership of various debts, obligations or assets.
Events and activities that create an insurable interest
At least in theory, in any cohabitation situation where both parties are bringing income into the household it will create an insurable interest. More specifically, insurable interest can be created by any of the following:
- An apartment in which both parties are on the lease.
- A jointly owned home, or other kind of real estate ownership.
- A mortgage in which both parties are named in the mortgage as co-mortgagors.
- Utility bills naming both parties.
- Debts naming both parties in the loan documents.
- Jointly own investments.
- A business venture that is jointly owned.
- The existence of one or more children of the couple.
Since each situation creates the need for income from both members of the couple, an insurable interest will exist. And documents will be available to prove that it does.
When an unmarried couple might be declined for life insurance
There are two situations where an unmarried couple might be declined for life insurance on one another…
When the couple are unable to prove insurable interest. There may be “gentlemen’s agreements” between an unmarried couple. This can happen when each party maintains separate debts, obligations and assets. Let’s say that one person moves into the others apartment; the lease on the apartment is in only one person’s name, and he or she was previously paying for it without the benefit of the others income. In this situation – without any written evidence of joint obligation – the insurance company may presume that no insurable interest exists. An insurance company won’t necessarily ask these questions, but if they do, your application could be denied for lack of written proof.
Between a couple who are not living together. Simply being in a relationship with a person does not necessarily create an insurable interest. Living in the same house or apartment makes it much easier to establish the fact, but if you’re both living in separate residences there may be no insurable interest. The only way to create that interest – apart from actually living in the same residence where both parties are jointly obligated – is to create other joint obligations that require the financial contributions of both parties. Having one or more children is one such example, but being jointly obligated on certain debts, or owning property together, are others.
As long as you can prove that an insurable interest exists between the parties, it is not at all difficult for unmarried couples to get life insurance.
