Do Life Insurance Companies Cover Domestic Partners?
Answered by Harold L. Lustig, author of 4 Steps to Financial Security for Lesbian and Gay Couples and president of Lustig Financial Services in San Francisco. April 21, 2003
Q: Dear Harold,
My partner and I would like to purchase a term life insurance policy to protect us in case of one us dies. We also want to purchase policy to insure the house. Are there any companies that will allow us to insure each other together or will we have to purchase two separate policies? How do I find a company that is friendly to gay, lesbian, bisexual and transgender families?
Michael
A: Dear Michael,
The answer to your question really depends on who are you trying to protect. If you are trying to protect each other in the event the death of you or your partner, then you will need two separate policies -- one on each of you with the other as beneficiary. If you are trying to protect a third party, such as a child, then you could get what is known as a "second-to-die" or survivor policy. A second-to-die policy would insure both of you but would not pay until both of you have died. So, you need to resolve what you are trying to accomplish.
You should know that state law controls who can own the policy or be the beneficiary. Generally, as long as there is an insurable interest, there should be no problem. If, however, you live in a state that is unfriendly, then you would need to have the policy owned by a trust and list the trust as the beneficiary. It's covered in my book, 4 Steps to Financial Security for Lesbian and Gay Couples (Fawcett Books, 1999). The way you find a friendly insurance company is by working with a GLBT-friendly adviser in your home state who is familiar with the insurance laws where you live. You should also meet with a GLBT-friendly attorney who can do appropriate legal work for you. To find a fair-minded attorney near you, visit the database of attorney referral services.
But remember, it is also important to choose the correct type of policy. You may have already figured out that a term policy, which only provides protection for a stated period of time, is the right option for you. But many people who buy term insurance for long periods of time find that they get trapped in prohibitive premiums at older ages when it is too late to change to something cheaper. Under present tax law, you can still accumulate funds on a tax-deferred basis inside a life insurance policy and then take the funds out tax-free. Since saving for retirement is an issue for most of us, that could help you with more than one goal.
Good luck finding a policy that works for you and your partner!