Life Insurance for Same-Sex Couples
There was a time in this country when gay and lesbian couples could not purchase life insurance and name their partners as the beneficiary. Luckily, that time has passed, but you still need to be careful when applying for life insurance. Not all insurance companies will insurance you and your partner and not all of those that will insure you will treat you the same way they treat heterosexual couples. Furthermore, gay and lesbian couples have higher insurance needs than straight couples, and you need a company that understands this.
Before you purchase term life insurance, you need to understand the basics to determine what is the cost of life insurance that will fit not only your budget, but protect your need. When you purchase this insurance, you are buying a policy that will be in effect for a specific number of years. This time period may range from 10 years all the way up to 30 years. If you live beyond this cutoff date, the policy will expire and you will have to purchase another one. If you die while the policy is in effect, your family will receive the benefit you chose.
Term life insurance is generally very inexpensive. It does have two downsides, and the first of these is that the cost of the policy goes up every time you renew it, sometimes substantially. The second is that it does not build a cash value the way that whole or permanent life insurance does.
Your premium will be determined by your age and your health. You will pay more if you smoke or engage in high-risk activities. A medical exam is usually required.
Calculating Your Insurance Needs
Gay and lesbian couples unfortunately require more insurance than their straight counterparts. You can start by using a standard formula to calculate your basic needs and then add-on the extra expenses you will need to cover.
First, your life insurance benefit will have to cover your funeral and related expenses. After that, you want to leave enough behind to pay off any debts you owe that could burden your partner and any children you may have. You may also want to purchase enough insurance to pay off the mortgage and send your children to college. If you are the primary breadwinner, you may want to leave enough money behind to provide income for your family for several years.
As an example, let us assume that you are a 30 year-old man with a partner, one child who is not yet school age, a job that pays $100,000 a year and a mortgage of $150,000. If you want to pay for final expenses of $20,000 and pay off the mortgage, you will need at least $170,000 worth of mortgage life insurance . If you want to pay for your child’s college education, you will probably need $250,000 or more. If you want to leave some income behind, you will need still more.
All of this sounds like fairly standard insurance calculations. But once you know how much you would need if you were part of a straight couple, you are going to have to add in extra to compensate for the added restrictions your family will face. These include restrictions on child survivor’s benefits, social security, and estate and inheritance taxes.
Child Survivor’s Benefits
If you have a biological or legally adopted child and you die tomorrow, your child will automatically be eligible to receive Social Security Survivor’s benefits until he or she turns 18. These benefits can provide up to $2,000 a month of income to your family. Because the federal government does not recognize gay and lesbian couples, this will not be the case if you are the non-custodial parent. That bears repeating: if you are not the biological or adoptive parent, your children will NOT get survivor’s benefits if you die. If you live in a state that allows second parent adoptions, get one right away. Otherwise, include this in your insurance calculations.
Legally married couples can collect spousal benefits, survivor’s benefits and a death benefit from Social Security when one of the couple dies. Gay and lesbian couples can not, so you should plan accordingly. This will impact the partner with the lower income more, so the higher-earning partner should have additional insurance.
Estate and Inheritance Taxes
Unlike straight married couples, gay and lesbian couples can not transfer property and assets tax-free when a partner dies. When you die, your partner may have to pay federal and state estate and inheritance taxes on any property which you leave him or her. These taxes can be tens of thousands of dollars. If you do not leave behind the money to cover these taxes, the property could be lost. Increase your life insurance benefits to provide protection to your partner and any children you may have.