The latest bulletin from the Office of National Statistics shows that the number of cohabiting couple families in the UK has doubled from 1.5 million in 1996 to 3.3 million in 2016, making them the fastest growing family type in the U.K.
Changes to the law have made it easier to claim the property of a spouse or civil partner. Unfortunately, unmarried, cohabiting couples have not been granted any more rights to a partner’s estate in the event of death. Leaving many people with financial difficulties upon the death of a partner.
In today’s society, marriage isn’t for everyone and some people prefer not to tie the knot. Read on to find out how life insurance could protect you and your partner if the worst was to happen.
What are my rights?
Many cohabiting couples believe that they would automatically inherit their partner’s property, pension and money if they died. Sadly, this is not the case. The Citizen’s Advice Bureau warns:
‘Your legal rights as a partner may depend on whether you are married or living together, also called cohabitation. Generally speaking, you will have fewer rights if you’re living together than if you’re married.’
The term ‘common law marriage’ causes a great deal of confusion, with 47% of the British public believing that it affords couples the same rights as a marriage – it doesn’t. This term is used to describe couples who live together but it has no legal recognition, even if you have shared a home for many years.
With this in mind, it is vital that you review your financial protection to prevent the loss of financial security alongside the loss of your partner.
How can life insurance protect my family?
No one wants to think about dying, but it is important to make sure that you have financial protection in place for your partner and children after you are gone. If you are not married, a life insurance pay-out could help to cover any financial loss that you may suffer as a result of your partner’s death.
Life insurance can:
1. Protect your partner
Taking out a life insurance policy is one way to protect your partner and children by reducing the risk of financial crisis if they were left without your income, pension or a bereavement allowance. A pay out could help to:
• Pay for your funeral
• Pay off the mortgage
• Clear debts such as car loans and credit cards
• Cover household bills
• Maintain your partner’s lifestyle by paying for clothes, holidays and dining out.
2. Protect your children
Unlike married couples, cohabiting couples are not entitled to bereavement benefits on their partner’s death and the remaining parent would not be entitled to receive widowed parent’s allowance.
Raising a child is expensive. According to Legal and General, the average cost per day to raise a child to their 18th birthday is £28.48. Also, an increasing number of offspring now rely on their parents for financial support for house deposits, car loans and childcare costs.
Life insurance could help to cover the costs of raising children and help older children to get a start in life with a house deposit, car or university education.
3.Protect your policy
If a life insurance policy is written in trust, the proceeds of the policy can be paid directly to the beneficiaries rather than to your legal estate.
By writing life insurance in trust, you can avoid inheritance tax and maximise the pay-out for your loved ones. The pay-out would also fall outside the probate process, reducing the risk of inheritance tax and making it quicker and easier for your partner to receive their pay out.
What options are available?
There are various ways to protect your family’s finances should the worst happen.
Here’s some information about different types of life cover:
• Term Life Insurance – this type of cover can be taken as level term or decreasing term. If you choose a level term policy, you will set the length of the policy term (e.g. 25 years) and the amount of cover (e.g. £100,000). If you choose a decreasing term policy (also known as mortgage life insurance) your insured amount will decrease in line with the outstanding mortgage debt.
• Whole of Life Insurance – this type of cover will provide a tax-free lump sum to your beneficiaries in the event of your death. Whole of Life cover guarantees a pay out because it covers you for life. Many policies are investment linked and if you decide that you no longer need the cover, you can cash in the policy. However, the ‘surrender value’ may be less than the total premiums paid, particularly during the early years of the policy.
• Over 50s Life Insurance – this type of cover is for people aged 50 and usually not older than 80. The amount insured is often lower than term insurance but so are the premiums and you are guaranteed to be accepted without any medical questions being asked.
So, it’s never too late to take care of your family. With our Over 50’s Life Insurance Plan, you will not be asked any medical questions and cover is guaranteed. Your loved ones will be provided with a tax-free cash lump sum when you die and you even have the option of increasing your benefit by taking the Golden Charter Funeral Care benefit.
There are many different life cover plans available. If you are not sure what type of life cover is right for you, then you should seek financial advice.