How To Get Life Insurance For Your Domestic Partner And Why You Should

 

If you are in a committed relationship with someone but not legally married, you may consider them your domestic partner. A domestic partner is someone who lives with you and shares a common household, but does not have a marriage license or a civil union certificate. A domestic partner can be of any gender or sexual orientation.

Being in a domestic partnership can have many benefits, such as emotional support, companionship, and shared responsibilities. However, it can also have some financial risks, especially if your domestic partner dies unexpectedly and leaves behind shared expenses or dependents. How will you cope with the loss of income and the increased costs of living? How will you protect the well-being and future of your dependents?

One way to safeguard yourself and your domestic partner from this scenario is to get a life insurance policy on them. This is a type of insurance policy that pays out a lump sum of money to a designated beneficiary in case of the death of the insured person. By having a life insurance policy on your domestic partner, you can ensure that you will receive financial support in case of their demise.

In this article, we will explain how to get a life insurance policy on your domestic partner, what are the benefits of doing so, and what are the challenges and drawbacks that you may encounter. We will also discuss some of the alternatives and options that you may have besides life insurance. By the end of this article, you will have a better understanding of how to secure your financial future and that of your domestic partner and dependents.

How to Buy Life Insurance on a Domestic Partner

Buying a life insurance policy on a domestic partner is not as complicated as it may sound. However, it does require some planning and coordination between you and your partner. Here are the steps involved in buying a life insurance policy on a domestic partner:

• First, you need to determine if you have an insurable interest in your domestic partner. This means that you have a legitimate financial stake in their survival and would suffer a loss if they die. Generally, if your domestic partner contributes to your household income or expenses, or if you have shared dependents with them, you have an insurable interest in them.
• Second, you need to get the consent of your domestic partner to buy a life insurance policy on them. This is because you cannot buy a life insurance policy on someone without their knowledge or permission, which is illegal and unethical. Your domestic partner will have to sign some forms and provide some personal information, such as their health history and lifestyle habits.
• Third, you need to apply for a life insurance policy with an insurance company that offers this type of coverage. You will have to choose the type of policy, the amount of coverage, and the premium payment method. You will also have to name a beneficiary who will receive the death benefit in case of your domestic partner’s death. This can be either you or someone else who has an insurable interest in them.
• Fourth, you need to wait for the underwriting approval from the insurance company. This is the process where they evaluate the risk of insuring your domestic partner based on their age, health, occupation, hobbies, and other factors. They may also require a medical exam or a blood test from your domestic partner to verify their information. Depending on these factors, they will either approve or decline your application or offer you different terms or rates.
• Fifth, if your application is approved, you need to pay the premium for the policy and keep it active until the end of the term or until your domestic partner dies, whichever comes first.

There are different types of life insurance policies that you can buy on your domestic partner, depending on your needs and preferences. Some of them are:

• Term life insurance: This is the simplest and cheapest type of policy that provides coverage for a specific period of time, such as 10, 20, or 30 years. The policy pays out the death benefit only if your domestic partner dies within the term. If they outlive the term, the policy expires and no benefit is paid.
• Whole life insurance: This is a type of permanent policy that provides coverage for the entire lifetime of your domestic partner, as long as the premiums are paid. The policy also builds up cash value over time, which can be accessed by the owner or the beneficiary for any purpose. The cash value grows at a guaranteed rate and is tax-deferred.
• Universal life insurance: This is another type of permanent policy that provides coverage for the entire lifetime of your domestic partner, as long as the premiums are paid. The policy also builds up cash value over time, but at a variable rate that depends on the performance of the underlying investments. The policy offers more flexibility and control over the premium payments, the death benefit, and the cash value.

The amount of coverage that you need to buy on your domestic partner depends on several factors, such as:

• The amount of income or expenses that your domestic partner contributes to your household
• The duration of your domestic partnership and your future plans
• The age and health of your domestic partner and your dependents
• The income and expenses of your household and your domestic partner’s household
• The future goals and needs of your dependents, such as education, medical care, or inheritance

A general rule of thumb is to buy enough coverage to replace the income that your domestic partner provides to your household for at least until the last dependent is grown. You can use a life insurance calculator to estimate how much coverage you need.

Benefits of Having Life Insurance on a Domestic Partner

Having a life insurance policy on a domestic partner can have several benefits for you and your partner. Some of them are:

• Financial protection: The main benefit is that you will have a financial safety net in case of your domestic partner’s death. You will receive a lump sum of money that can help you cover the expenses and needs of your dependents, such as housing, food, clothing, education, medical care, and more. You will also avoid any financial hardship or debt that may result from losing your domestic partner’s income or support.
• Peace of mind: Having a life insurance policy on your domestic partner can also give you peace of mind and reduce stress. You will not have to worry about what will happen to you and your dependents if your domestic partner dies unexpectedly. You will also not have to rely on your domestic partner’s financial stability or responsibility to provide for you and your dependents.
• Improved relationship: Having a life insurance policy on your domestic partner can also improve your relationship with them. It shows them that you care about their well-being and future and that you are willing to support them financially. It can also foster a sense of trust and cooperation between you and your domestic partner, especially if they consented to the policy.

Challenges and Drawbacks of Having Life Insurance on a Domestic Partner

Having a life insurance policy on a domestic partner is not without its challenges and drawbacks. Some of the potential issues or risks that you may face when having a life insurance policy on a domestic partner are:

• Taxation: The premium that you pay for the policy may not be tax-deductible for you, unless you can prove that it is a business expense or a form of alimony. The death benefit that you receive from the policy may also be taxable for you, depending on how the policy is structured and who is the beneficiary. You may have to pay income taxes or estate taxes on it, which can reduce the net benefit that you receive.
• Beneficiary disputes: If you are not the beneficiary of the policy, you may have no control over who receives the death benefit in case of your domestic partner’s death. Your domestic partner may change the beneficiary at any time without your knowledge or consent, unless they have made it irrevocable. They may also name someone else who has no insurable interest in them, such as a new partner or a friend. This can create legal disputes and conflicts between you, your partner, and the other beneficiaries.
• Policy cancellation: If you are not the owner of the policy, you may have no control over whether the policy remains active or not. Your domestic partner may cancel or surrender the policy at any time without your knowledge or consent, unless they have agreed otherwise. They may also stop paying the premiums or borrow against the cash value, which can reduce or terminate the coverage. This can leave you unprotected in case of their death.
• Premium payments: If you are paying for the policy, you may have to bear an additional financial burden on top of your other expenses. You may also have to deal with some resentment or hostility from your domestic partner, who may feel that you are intruding on their privacy or trying to profit from their death. You may also have to negotiate with them about how much coverage they need and how much premium they are willing to accept.

Alternatives and Options to Having Life Insurance on a Domestic Partner

Having a life insurance policy on a domestic partner is not the only way to secure financial support from them in case of their death. There are some other options that you may consider, such as:

• Domestic partnership agreement: This is a type of legal document that outlines the rights and responsibilities of each partner in a domestic partnership. It can include provisions for how to divide assets, debts, and expenses in case of separation or death. It can also specify how to handle alimony, child support, inheritance, and other financial matters. A domestic partnership agreement can offer some clarity and certainty for both partners, but it can also be complex and costly to draft and enforce.

• Joint ownership: This is a type of arrangement where both partners own a property or an asset together, such as a home, a car, or a bank account. It can allow both partners to have equal access and control over the property or asset, as well as share the benefits and liabilities. It can also ensure that the surviving partner inherits the property or asset in case of the other partner’s death, without going through probate. Joint ownership can offer some convenience and security for both partners, but it can also have some tax implications and legal risks.
• Trust: This is a type of legal entity that holds and manages assets for the benefit of one or more beneficiaries. It can be created by one partner or both partners, and it can include any type of assets, such as cash, stocks, bonds, or real estate. It can allow the partners to control how the assets are distributed and used in case of their death or incapacity. It can also provide some tax benefits and asset protection for both partners, but it can also be complex and expensive to set up and administer.

Each of these options has its own pros and cons, and you should weigh them carefully before choosing one. You should also consult with a financial professional who can help you compare and contrast these options with life insurance and advise you on the best option for your situation.

Conclusion

Having a life insurance policy on a domestic partner can be a smart and sensible way to protect yourself from financial loss in case of their death. It can provide you with financial security, peace of mind, and improved relationship with your partner.

However, having a life insurance policy on a domestic partner also has some challenges and drawbacks that you need to consider before buying one. You need to get their consent, insurable interest, and underwriting approval, as well as deal with taxation, beneficiary disputes, policy cancellation, and premium payments.

You may also have some alternatives and options to having a life insurance policy on a domestic partner, such as a domestic partnership agreement, joint ownership, or trust. You should compare and contrast these options with life insurance and choose the best one for your situation.

If you are interested in learning more about how to get a life insurance policy on a domestic partner and why you should, contact us today. We can help you find the best policy for your needs and guide you through the process of buying one.