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How Does Life Insurance Work in the LGBTQ+ Community?

Prior to 2015, same-sex couples did not have the ability to get the same life insurance coverage as straight couples. However, when the Supreme Court legalized same-sex marriage, couples in the states that recognize the marriage gained new avenues for lower insurance rates and expanded coverage. The Social Security Administration recognizes same-sex marriages in all states. Same-sex spouses who wed in the United States are entitled to the same survivor death benefits as any other married couple.

But what if you and your partner are just living together or your state doesn’t recognize same-sex marriage?

While your sexual orientation won’t affect your eligibility to purchase a life insurance policy, your marital status poses some issues related to insurable interest. Not everyone can be a beneficiary of your life insurance policy. The named beneficiaries must be people who would suffer hardship or financial loss in the event of your death.

Here are three questions to keep in mind to determine insurability to keep in mind:

  • In the event of the insurance death, how would the beneficiary suffer financially?
  • What is the benefit shares relationship to the insured?
  • What is the financial dependence on the insured?

If you and your partner are not married but have joint assets together such as a home or children, either one of you can be issued an insurance policy and list your partner as the beneficiary.

Children that are biological or legally adopted are natural beneficiaries to the union of a marriage. Families who are blended, have foster children, or soon-to-be adopted children, would also need documentation to show justification as a beneficiary.

What Types of Insurance Should We Be Looking At?

As stated previously if your goal is to protect loved ones were covered debts or secure your future, life insurance whether it’s term whole life or universal life can provide options. Most people utilize term insurance to help with mortgage protection car payments and credit card debt. Whole life and universal life are often used to help loved ones save for college, retirement planning, and long-term care planning.

Guaranteed Life – is a type of insurance that does not require you to take a medical exam or answer any health questions. It is for people who have concerning health issues which may keep them from buying other types of policies. Usually, these policies range between $5,000 to $25,000. This money is used to cover the cost of funerals and end-of-life expenses.

Term Life – these policies are level premiums with a guaranteed death benefit. The premiums are paid monthly or yearly and if you pass away before the insurance expires your chosen beneficiaries receive the benefit. If you’re still alive at the end of the policy, the policy terminates, and you’ll need to purchase a new policy.

Whole Life – is different than term because it has a cash value that builds up during the lifetime of a policy. As long as you pay the insurance premiums, your coverage and portion go into a tax-deferred savings vehicle. Eventually, this policy will have a cash value that you can borrow against or withdraw. The premiums on whole life are significantly higher, but the returns are worth it. At your death, your chosen beneficiaries receive the payout.

Universal Life – these types of policies are used when you are more concerned about cash value build-up versus a death benefit. The premiums are usually less than whole life and the cash value accumulation is usually greater, but the death benefit is significantly reduced.

Please keep in mind that you’re able to customize all your life insurance policy options with Riders. A few riders to keep in mind are:

  • Terminal Illness Rider – also known as the accelerated death benefit. This allows you to gain access to your policy’s death benefit early if you receive a terminal diagnosis.
  • Waiver of Premium Rider – if you become disabled and can no longer work, any future premiums may be waived.
  • Long-Term Care (LTC) Rider – while there are separate long-term care insurance policies out there, you can also add a rider to your current life insurance policy that will payout for nursing or in-home care.

The LGBTQ+ community is the least insured and the most underinsured of all the markets. Protection is imperative for the welfare of those people who matter most to you. Insurance does not care what your pronouns are, or what your sexual orientation is.

It is important to keep in mind that every state has different regulations and rules pertaining to gender identity. Sometimes, federal laws impact the availability of certain types of coverage. The correct policy and coverage for you also depend on your income level, age, financial goals, and dependents. The best way to determine how to move forward and to find the best coverage for your situation is to give me a call and get the conversation started.

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