Summary of this article
Life insurance nominees in live-in relationships may not be legal heirs
Without a Will, family members can claim insurance proceeds
Most health policies do not include unmarried partners in family floaters
Experts advise separate health cover and clear estate planning
When staying in a live-in relationship, insurance does not work in the same way as it does for married couples. Here is what to keep in mind to protect financial interests and stay legally compliant.
Life Insurance: Nominees And Estate Planning
Life insurance policies typically designate a nominee for the amount the insurance provider will pay. “The nominee may not necessarily be the legal owner of the proceeds; rather, they will be acting as the custodian or trustee of the proceeds. Because an unmarried partner can still be nominated in a life insurance policy and will receive payment from the insurance company, the current trend is that unmarried partners have received payment even though the ultimate legal title to the funds will depend on succession law and the claims of the deceased's heirs,” says Arun Ramamurthy, co-founder, Staywell.health.
If a person does not have a well-defined estate plan, their family members can claim the proceeds of the life insurance policy as legal heirs.
For those who are in a relationship but are not married, insurance planning and estate planning should closely align. A thorough, properly executed will will clearly define who the beneficiary(ies) of the proceeds, if any, are to be and will aid in honoring the wishes of the policyholder.
“Every so often, many financial advisors recommend that individuals review the names of the nominees on their life insurance, any investments, and bank accounts (in order to ensure that their wishes are carried out and to reduce any risk of controversy,” says Ramamurthy.
Taking these steps will eliminate ambiguity and reinforce the concept that a life insurance policy will provide someone with financial security.
Health Insurance: Coverage For Unmarried Couples
“In India, the majority of health insurance coverage structures are family floater formats around legal relationship statuses, which include spouses, children, and dependent parents. Most insurance companies do not have this provision automatically available for unmarried partners to be included in the family floater policy,” says Sarita Joshi, head of health & life insurance, Probus.
Nevertheless, due to social changes occurring within India, the health insurance marketplace has slowly started to adapt and has started to cater to a wider range of definitions for what constitutes a dependent. A limited number of companies have begun to roll out non-standard policies with more flexibility than typical family floater policies, and while this trend is starting to catch hold within the Indian health insurance market at large, it is still relatively rare.
“For couples that are unmarried, protecting both members of the couple by individually maintaining adequate health insurance coverage (as opposed to dependent coverage) should be the primary focus of any financial plan,” says Ramamurthy.
It's wise to select a health insurance plan/policy that has an adequate sum insured, offers restoration benefits, and/or provides additional coverage for unexpected medical expenses due to hospitalization or other means, since healthcare costs are on the rise.
Protecting Your Financial Interests
Unmarried couples must take extra care to safeguard their financial interests because they may not receive the same statutory rights available to spouses. Drafting a clear will and naming each partner as the primary beneficiary on all life insurance policies, investment accounts, and bank accounts is one of the most important ways couples can protect themselves financially.
“In addition, couples should also maintain health insurance coverage for themselves and have all necessary documentation regarding any and all other joint financial commitments so that in the event of death or illness, there is minimal ambiguity for insurers and legal heirs,” says Joshi.
