By Rachael Welsh, Head of Marketing The trend of unmarried couples living together is growing and looks set to continue. According to ONS data, the proportion of couples who were cohabitees in 2020 accounted for more than one in 3 (37%) couples under 45 and more than one in 4 (26.4%) couples under 65¹. The 2021 ONS census data confirms this upward trend, with a greater proportion (27.6%) of couples under 65 reporting they were living as unmarried cohabitees one year on². This trend poses a challenge for our insurance industry when it comes to making sure life insurance payouts reach the right person, especially where that person is an unmarried partner. The challenge is to do with probate. As advisers who deal with life insurance will know, probate is the legal right to deal with someone’s property, money and possessions (their estate) when they die. This estate includes the life insurance payout, unless measures are put in place to keep it separate. The problem is that, without a will, unmarried partners are not ‘entitled’ to receive the payout under intestacy rules. These are the rules that relate to who inherits the estate if someone dies without a will. The rules decide how the estate must be shared amongst the most ‘entitled’ people. These are the closest living relatives, starting with the husband or wife or civil partner. Unmarried partners are not ‘entitled’ and so the life insurance payout won’t come to them – unless their partner’s relatives are generous enough to make a gift of the money to them. This leaves a big problem for our industry under Consumer Duty. As Swiss Re points out in its 2023 Life Claims: a beneficial direction report, “it’s hard to identify a more important consumer outcome than the payment of a death claim that is not only timely but is to the intended person”. The reinsurer estimated that “one in three couples taking life cover could be at risk of the money intended for the partner not reaching them, if some means of directing it to them is not put in place.”³ For unmarried couples taking out life insurance, it’s therefore really important to either write the policy in trust, or put in place beneficiary nomination, to make sure the money goes to the person they want it to. So, what is beneficiary nomination? Beneficiary nomination is the process of naming the people you want to benefit from the life insurance payout within the policy application process. It uses contract law to make sure the money goes to those named people and it means the payout can bypass probate. The end outcome is much the same as a trust, in that the named beneficiaries receive the payout, but with beneficiary nomination the implementation is easier. So how does it work? The process of beneficiary nomination takes place as part of the application. The policyholder can add a number of named beneficiaries and often can specify the percentage of the payout they want to go to each person in the application form. The beneficiaries can Creating Better Life Insurance Outcomes for Unmarried Couples 08 SUMMER PROTECT NEWSLETTER
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