How to Approach Life Insurance as Unmarried Partners

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19 Minute read

Originally published: September 18, 2023

How to Approach Life Insurance as Unmarried Partners

Talk to one of our experienced advisors today!

19 Minute read
Originally published: September 18,  2023

How to Approach Life Insurance as Unmarried Partners

Finding the right life insurance as unmarried partners can be a complex task. Traditional financial advice often caters to married couples, leaving unmarried partners in a bit of a grey area.

From understanding eligibility criteria to sorting through tax implications, this blog aims to shed light on essential aspects of life insurance for unmarried couples. We’ll explore how to apply for a policy, determine the amount of coverage needed, choose a beneficiary, and much more. Let’s dive into the questions

Can We Buy Life Insurance as Unmarried Partners

Yes, it’s entirely possible to secure life insurance as unmarried partners in Canada. This is known as insurable interest signifying you have a legitimate reason to insure your partner, often because you share financial responsibilities or have children. Many people also opt for this route to provide coverage for aging parents.

Obtaining a life insurance policy for your partner requires their consent, and they may be asked to provide some health-related information. Consulting with an insurance specialist can help you identify the most suitable coverage for your family and walk you through the application process, offering both you and your partner valuable financial security.

Case Study: Sarah and Alex’s Journey to Financial Security

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Background: Sarah, a graphic designer, and Alex, an IT consultant, have been in a committed relationship for five years. They live together in a rented apartment and have joint financial responsibilities like rent, utilities, and a car loan. While they have discussed marriage, they’ve decided to remain unmarried for the foreseeable future. Neither has any existing life insurance policies, but the sudden passing of a close friend made them realize the importance of financial planning for the unexpected.

The Challenge: Both Sarah and Alex have separate financial obligations. Sarah is still paying off her student loans, while Alex supports his aging mother. They want a life insurance policy that provides peace of mind but are unsure about the right type of coverage, the tax implications, and how to choose beneficiaries, given they aren’t married.

Steps Taken:

  1. Consulted a Financial Advisor: They started by consulting a financial advisor familiar with the needs of unmarried couples. After assessing their debts, future obligations, and savings, the advisor recommended that they each get term life insurance with a coverage 10 times their annual incomes.
  2. Research and Application: Sarah and Alex then researched different insurance providers and applied for individual term life policies. They submitted all required documents, including identification and income verification, and both underwent medical exams as part of the application process.
  3. Choosing Beneficiaries: Given their relationship status, they decided to list each other as the primary beneficiaries on their respective policies, with Alex also adding a secondary beneficiary designation for his mother.
  4. Addressing Tax Implications: To understand any tax implications, they consulted a tax advisor. They learned that life insurance payouts wouldn’t be taxable but were advised to update their wills to streamline the inheritance process and avoid any complications.
  5. Legal Consultation: They also consulted a legal advisor to draft a cohabitation agreement that outlines their financial commitments and what happens to their assets, including the life insurance policies, should they separate.

Results: Sarah and Alex were approved for their individual term life insurance policies, with coverage amounts that would sufficiently cover their debts and provide financial support for the surviving partner. They also established legal and financial frameworks to protect their assets and interests, providing them peace of mind for the future.

Lessons Learned:

  • Professional Guidance is Invaluable: Navigating life insurance was more complicated than they initially thought. Consulting financial, legal, and tax advisors helped them make informed decisions.
  • The Importance of Regular Updates: Sarah and Alex learned that life situations change, and they need to keep their policies, wills, and legal agreements up-to-date.

The Essential Role of Life Insurance for Unmarried Couples

Life insurance is often thought of as something only married couples need to worry about. The assumption tends to be that if you’re not legally bound to someone, there’s no reason to consider what might happen financially if one of you were to pass away unexpectedly. However, this couldn’t be further from the truth. Life insurance is just as crucial for unmarried couples as it is for those who have tied the knot, and here’s why:

Financial Interdependence

Many unmarried couples live together, share expenses, and even co-own property. If one partner dies without life insurance, the financial burden can be overwhelming for the surviving partner. Life insurance can help relieve this burden by covering immediate expenses such as funeral costs, as well as ongoing financial responsibilities like mortgage payments or rent.

Shared Debts

It’s common for unmarried couples to have shared debts like car loans or mortgages. Without life insurance, if one partner passes away, the other could be left with the full responsibility of those debts, which might become unmanageable on a single income.

Children and Dependents

If you have children or other dependents, their well-being is another reason to consider life insurance seriously. A life insurance policy can ensure they are financially taken care of in the case of a parent or guardian’s untimely death, covering everything from day-to-day expenses to future education costs.

Lack of Legal Protection

Unmarried couples do not have the same legal protections as married couples in many jurisdictions. For instance, without a will specifying otherwise, your partner may not be entitled to any of your assets upon your death, leaving them financially vulnerable. A life insurance policy with your partner as the beneficiary ensures that they will receive financial support, regardless of the legal landscape.

Flexibility in Beneficiary Designation

Life insurance allows you the flexibility to name anyone as your beneficiary, offering a way to financially protect the person you love, even if you’re not married to them. However, it’s crucial to keep the beneficiary designation updated, especially if your relationship status changes.

Business Ownership

If you and your partner co-own a business, the death of one partner can have severe financial implications on the company’s operations. A life insurance payout could serve as a financial cushion, facilitating smoother business succession or liquidation.

Financial obligations, shared debts, children, and lack of legal protections all make life insurance an essential consideration for unmarried couples. Life insurance serves as a financial safety net, helping to mitigate the emotional and financial turmoil that accompanies the loss of a partner. Therefore, if you’re in a committed relationship but haven’t yet taken the plunge into matrimony, don’t overlook this important financial planning tool.

What Determines the Cost of Life Insurance and How Unmarried Couples Can Get the Most Afford

The cost of life insurance is influenced by a variety of factors that insurance providers use to assess the risk associated with insuring an individual. Age is a significant determinant, with younger individuals generally receiving more affordable rates due to lower associated risks. Health is another crucial consideration; applicants may undergo a medical examination, or at least fill out a detailed questionnaire, to determine their overall health status. Conditions such as high blood pressure, diabetes, or a history of heart problems can result in higher premiums. Lifestyle choices, such as smoking, excessive drinking, or engaging in high-risk activities like skydiving, can also impact the cost of your policy.

For unmarried couples seeking affordable rates, there are several strategies to consider. First, apply for life insurance at a younger age when premiums are typically lower. Secondly, a term life insurance policy, which provides coverage for a specific period, is usually more affordable than whole or universal life policies that offer lifetime coverage. Healthier individuals should opt for policies that require medical examinations for more accurate and often better rates. Combining policies or selecting riders tailored to your needs can sometimes offer cost benefits. Additionally, some insurance providers offer discounts for healthy lifestyle choices, such as regular exercise or a balanced diet. Lastly, shopping around and comparing quotes from multiple providers can help you find the most affordable rates tailored to your specific situation.

Are Unmarried Couples Eligible for the Same Types of Life Insurance Policies?

When it comes to life insurance, unmarried couples often have access to the same types of policies as married couples. However, there are some specific eligibility criteria that they should be aware of. Here’s a breakdown:

Types of Life Insurance Policies Available

  • Term Life Insurance: Provides coverage for a specific period, usually 10, 20, or 30 years. Both married and unmarried couples can typically buy term life insurance.
  • Whole Life Insurance: Provides lifetime coverage with an additional savings component. Again, marital status generally does not affect eligibility.
  • Joint Life Insurance: Covers two individuals and pays out after the first or both people die, depending on the terms. These policies are often available to unmarried couples, although some providers may have specific requirements or limitations.

Eligibility Criteria

  • Insurable Interest: To buy a life insurance policy on someone else, you must have an insurable interest, meaning that you would suffer financially from the other person’s death. While married couples are automatically assumed to have this, unmarried couples may need to demonstrate their financial interdependence, such as shared property or children.
  • Evidence of Partnership: Some insurance companies may ask for proof of a long-term relationship before selling a joint life insurance policy to an unmarried couple. This could include cohabitation agreements, shared bills, or joint financial accounts.
  • Health and Lifestyle: Both partners will likely need to go through underwriting, involving a medical exam and lifestyle questionnaire, to determine eligibility and rates. This is the same for married and unmarried couples.

How to Determine the Amount of Coverage Needed for Unmarried Couples

Determining the right amount of life insurance coverage is a critical step for anyone considering a policy, but it is especially important for unmarried couples who may not have the legal protections afforded to those who are married. Here’s how you can make an informed decision:

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Role of Debt, Savings, and Financial Responsibilities

  • Shared Debt: Whether it’s a mortgage, car loan, or other types of debt, the coverage should be substantial enough to clear these debts so as not to burden the surviving partner. If one partner passes away, the other might find it difficult to manage loan payments on a single income.
  • Day-to-Day Expenses: Consider your joint monthly expenses like rent, utilities, groceries, etc. Life insurance can provide for several months to years of these living expenses.
  • Savings and Investments: If you already have substantial savings or investments, you may not require as much coverage. However, think about whether these assets are easily liquidable and accessible by your partner.
  • Future Financial Responsibilities: This includes your plans for children’s education, retirement, or any significant upcoming financial commitments. You’ll want your coverage to support these long-term needs in the event of your death.
  • Elderly Parents or Other Dependents: If you or your partner are financially responsible for dependents other than children, this needs to be factored into your calculations.

Rule of Thumb Methods

  • 10x Annual Income: A commonly used guideline is to have life insurance coverage that is at least 10 times your annual income. This ensures a certain level of financial security for your partner, covering immediate needs and future financial commitments.
  • The DIME Method: This stands for Debt, Income, Mortgage, and Education. Add up your debts, one year’s worth of income, remaining mortgage balance, and anticipated educational expenses for children. The sum provides a comprehensive picture of your financial responsibilities and thus, how much coverage you may need.
  • Needs Analysis: This is a more detailed approach where you list out all anticipated expenses (funeral costs, estate taxes, daily living expenses, etc.) your partner would face in the event of your death. Subtract your liquid assets from these to find out the coverage needed.

Considerations Specific to Unmarried Couples

  • Legal Restrictions: If you’re not legally married, ensure that your partner will be able to access the death benefits without any legal complications. A clear will and named beneficiaries can help.
  • Tax Implications: Though life insurance payouts are generally not taxed, the way these funds integrate with your other assets may have tax implications, particularly for unmarried couples who don’t benefit from spousal exemptions.

By thoroughly evaluating your debts, savings, and financial responsibilities, and applying rule-of-thumb methods suited to your personal circumstances, you can arrive at a coverage amount that provides financial security for your partner. 

How to Choose a Beneficiary?

Choosing a beneficiary for your life insurance policy is a critical decision, especially for unmarried couples. In the absence of a legal marriage, the rules and considerations can be somewhat different. Here’s what you should know:

Legal Limitations on Choosing a Non-Spouse as a Beneficiary

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  • Insurable Interest: In many jurisdictions, to name someone as a beneficiary of your life insurance policy, you need to demonstrate an “insurable interest” in that person. While a spouse automatically meets this criterion, unmarried couples may need to prove financial interdependence, cohabitation, or shared assets to establish this interest.
  • Probate and Legal Disputes: Without a legal marriage, other family members might challenge your choice of beneficiary, particularly if you have children or other dependents. Clearly laying out your wishes in a will can add an extra layer of legal protection.
  • Minor Children: If you have minor children, be cautious about naming them as direct beneficiaries, as they cannot receive funds until they reach the age of majority. In such cases, establishing a trust or appointing a guardian can be a wise choice.

Importance of Keeping Beneficiary Designations Up to Date

  • Changing Relationships: Unmarried couples may not have the binding legal commitments that come with marriage, making the relationship potentially more fluid. If your relationship status changes, your choice of beneficiary should be revisited and updated accordingly.
  • Life Changes: Major life events such as the birth of a child, the purchase of a home, or a significant change in financial circumstances should trigger a review of your beneficiary designation.
  • Secondary and Contingent Beneficiaries: In addition to your primary beneficiary, consider naming secondary or contingent beneficiaries. This becomes crucial if your primary beneficiary predeceases you or cannot accept the benefits for some reason.
  • Annual Review: As a best practice, review your life insurance policy, including the beneficiary designations, at least annually or after significant life events. This will help ensure that the policy remains aligned with your current wishes and life circumstances.

Additional Tips

  • Clarity and Specificity: Make sure to be as specific as possible when naming your beneficiaries to avoid any ambiguity that could lead to legal challenges.
  • Consult a Financial Advisor and Legal Counsel: Particularly for unmarried couples, the regulations and potential complications make it advisable to consult professionals. They can provide advice tailored to your specific situation, taking into account both legal and financial considerations.

Choosing a beneficiary is not just about picking a name; it’s about ensuring that the people who depend on you will be financially secure in your absence. Given the potential legal limitations and the importance of keeping designations up to date, this is a decision that deserves careful thought and regular revisiting.

What Tax Implications Should Unmarried Couples Consider?

Life insurance death benefits are generally not considered taxable income for the recipient, whether a spouse or an unmarried partner. The exception is if the policy accrues interest before the benefit is disbursed; that interest is taxable. Since there’s no estate tax, there’s no concern about the benefit being included in the estate value for tax purposes, making spousal exemptions for such taxes a non-issue.

For those holding permanent life insurance policies like whole or universal life, cashing out the policy before death could lead to tax liabilities on amounts that exceed the total premiums paid. If life insurance is bundled with retirement accounts or annuities, the tax rules can be complex and might differ for an unmarried partner compared to a legal spouse.

As for ownership structures, they may not offer significant tax advantages due to the lack of estate tax. While trusts can serve other purposes, setting one up specifically for tax advantages might not be as relevant. 

How to Apply for Life Insurance as Unmarried Partners? 

Applying for a life insurance policy as an unmarried couple involves several steps, some of which may be unique to your situation. Here’s a general guideline to navigate the process:

  1. Research Suitable Policies: Start by researching various life insurance providers and the types of policies they offer. Understand the difference between term life insurance, whole life insurance, and other permanent life insurance policies to determine which best fits your needs. Online quotes can provide a preliminary idea of costs based on factors like age, health, and lifestyle.
  2. Consult a Financial Advisor: A financial advisor can offer tailored advice based on your financial situation, future plans, and the kinds of financial protection you desire. They can help you determine how much coverage you need and whether certain riders or features would be beneficial.
  3. Gather Required Documents: Typically, you’ll need identification such as a driver’s license or passport, income verification documents like recent payslips or tax returns, and medical records if applicable. Some policies may require a medical exam.
  4. Application Process: You’ll need to fill out an application form, either online or in paper format. The application will include questions about each applicant’s personal information, medical history, lifestyle choices (e.g., smoking, alcohol consumption), and potentially even occupational risks.
  5. Designate Beneficiaries: Decide who will be the beneficiary or beneficiaries of the policy. This is a critical step, especially for unmarried couples, as you want to make sure that your partner is designated to receive the payout. Make sure to keep the beneficiary designation up to date, especially if your circumstances change.
  6. Undergoing Medical Exams: Some policies require a medical exam, which generally involves a basic health check-up, including blood and urine tests. The results could affect your premiums and eligibility for specific policies.
  7. Policy Approval and Payment: Once the application is submitted and any required medical exams are completed, you’ll wait for the policy approval. This can take from a few days for simplified policies to several weeks for more complicated ones. Upon approval, you’ll need to make your first premium payment to activate the policy.
  8. Legal and Tax Consultation: Given the complexities around taxation and potential limitations for unmarried couples, it’s advisable to consult with tax professionals and possibly legal advisors to understand any implications related to policy ownership, beneficiary designation, and other issues.
  9. Review and Update Regularly: Life situations and financial needs change. Make it a habit to review your policy annually or after major life events like the purchase of a home, the birth of a child, or change in employment status.


In a world where traditional norms are continually evolving, it’s crucial to recognize that life insurance is not just a married couple’s game. Unmarried partners have just as much need for financial stability and peace of mind in the face of life’s uncertainties. From understanding how to apply for a policy to grappling with tax implications and choosing the right beneficiary, it’s clear that life insurance serves as an invaluable safety net for unmarried couples. Whether you’re just starting your life together or have been in a committed relationship for years, the time to plan for the future is now. A well-thought-out life insurance policy can be the cornerstone of that plan, offering protection and security for the road ahead.

Frequently Asked Questions (FAQs) about Approaching Life Insurance as Unmarried Partners

It’s not mandatory for both partners to apply, but it is often recommended for financial security. Each partner’s policy can protect against financial hardships in case of unexpected death or illness

Yes, many insurance providers offer joint policies to unmarried couples. However, read the terms carefully to make sure the policy fits your specific needs and doesn’t contain limitations related to marital status.

Coverage depends on various factors like current debts, future financial responsibilities, and existing savings. Some financial advisors recommend a coverage amount that is 10 times your annual income as a general rule of thumb.

Life insurance payouts are generally not taxable. However, any interest accrued on the payout before disbursement is taxable. Tax laws are complex, so consult a tax professional for advice tailored to your situation.

Yes, an unmarried partner can be either the primary policyholder or an additional insured on the policy. Again, consult the policy terms to ensure it meets your needs.

If you have individual policies, nothing needs to change unless you want to update your beneficiary information. For joint policies, you may be able to split them into two individual policies or cancel the policy altogether, depending on the terms.

Medical exam requirements vary by policy. Term life insurance policies often require medical exams, while some other types of policies may not.

Yes, various riders like child protection, critical illness, or disability income can be added to benefit unmarried couples specifically.

Yes, you can generally change beneficiaries unless you’ve designated an irrevocable beneficiary. It’s crucial to keep beneficiary designations up to date to reflect your current wishes.

While the insurance policy can serve as a financial safety net, having a legal agreement can clarify things like asset division, particularly since unmarried couples may not have the same legal protections as married couples in case of a breakup or death.

Find a solution for what you’re looking for 

Taking the time to secure a well-suited life insurance policy today can offer invaluable peace of mind and financial stability for both you and your partner, ensuring that you’re prepared for whatever the future holds. At Protect Your Wealth, we work with and compare policies and quotes from the best life insurance companies in Canada to ensure the best solution for you and your needs. We provide expert life insurance solutions, including no medical life insurance, critical illness insurance, term life insurance, and permanent life insurance to build the best package to give you the protection you need. 

Contact Protect Your Wealth or call us at 1-877-654-6119 to talk to an advisor today! We’re proudly based out of Hamilton, and service clients anywhere in Ontario, British Columbia, and Alberta including areas such as Waterdown, Medicine Hat, and Victoria.

Talk to an advisor today.

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