Domestic Partner Life Insurance: What You Need To Know

Domestic partner life insurance is a way for couples who aren't married but live together to protect their families financially for specific lengths of time. It is a trusted way to ensure financial protection for both partners if something unforeseen happens to one of them. Domestic partner life insurance covers a person who lives with the policyholder in a long-term, committed relationship but isn't legally married. Couples in domestic partnerships enjoy the same rights and benefits as married couples, including health and life insurance coverage.

Joint life insurance vs. separate policies

Domestic partners can benefit from joint life insurance policies, which are a popular choice for people looking to safeguard their family's financial future and provide security for their loved ones. This type of insurance covers two people, usually a married couple or business owners, under one policy and pays out a death benefit when one or both insured individuals pass away.

Now, when it comes to choosing between a joint life insurance policy and separate policies, there are several factors to consider. Here are the key differences between the two options:

Joint Life Insurance Policy:

• Cost-effectiveness: Joint life insurance policies often cost less than purchasing two separate individual policies, making them a more affordable option for couples or business partners.
• Simplicity: With a joint policy, there is only one policy to manage, which simplifies the insurance process and makes it easier to administer compared to having multiple policies.
• Shared protection: The death benefit provides financial protection for both individuals, ensuring that the surviving person is supported financially in the event of their partner's death.
• Convenience: Joint life insurance offers convenience, especially for couples with shared financial responsibilities or dependents, as it provides coverage for both individuals under a single policy.
• Estate planning: Joint life insurance can be used as a tool for estate planning, helping to cover expenses such as funeral costs, outstanding debts, and transferring wealth to beneficiaries.

Separate Policies:

• Flexibility: Separate insurance policies offer more flexibility and customization, allowing each person to tailor the coverage based on their unique needs, goals, and financial circumstances.
• Individual coverage: With separate policies, each person has their own coverage, which means that the surviving partner will still have their own insurance in place even after the death of their spouse.
• Choice of policies: Separate policies allow individuals to shop for a variety of policies that can be tailored to their specific needs and preferences.
• Beneficiary choice: With separate policies, individuals can choose their own beneficiaries, providing more control over who receives the death benefit.
• Divorce considerations: In the event of divorce or separation, separate policies are easier to manage and do not require the same level of decision-making regarding policy ownership and beneficiary designations.

Ultimately, the decision between a joint life insurance policy and separate policies depends on the specific needs, goals, and financial situation of the individuals involved. It is important to carefully consider all factors and, if necessary, consult with a financial professional to determine the most suitable choice.

Tax implications of domestic partner insurance

Domestic partnerships are when two people live together and share their domestic life as if married but are not legally wedded or joined by a civil union. People in domestic partnerships are entitled to the same rights and benefits as married couples, including health and life insurance coverage.

While domestic partners can be added to insurance plans, there are tax implications to consider. Here are the key points regarding the tax consequences of enrolling a domestic partner in health or life insurance:

• Tax-dependent Status: If your domestic partner qualifies as a tax-dependent per IRS regulations, you will not pay additional taxes to cover them. However, if they do not qualify as a tax-dependent, the value of providing them with health or life insurance is considered taxable income.
• Taxable Income: The premiums paid by the insurance company for your domestic partner's coverage are treated as taxable income. This means you will need to pay income tax and Social Security taxes on this amount.
• Imputed Income: The situation is known as "imputed income." Since domestic partners are not considered spouses or dependents under federal law, the benefits they receive are taxable.
• W-2 Reporting: The value of the coverage provided to your domestic partner will be reported on your W-2 form, and your withholdings may be adjusted accordingly.
• State-level Variations: Some states, such as New York and California, allow pre-tax deductions for domestic partners. However, this may impact your federal tax returns, and you may need to make manual adjustments.
• Dependent Children: If your domestic partner has eligible dependent children, there may be additional tax consequences. You may be taxed on the amount that provides coverage for their dependent children.
• Employer Contributions: Employer contributions towards domestic partner insurance are generally considered taxable income. However, if your domestic partner qualifies as your tax-dependent, these contributions may be tax-free.
• Income Tax Withholding: The additional taxable income from covering your domestic partner may result in increased income tax withholding from your paycheck to cover the tax liability.
• Tax Brackets: When deciding whose insurance plan to use for covering your domestic partner, consider your respective tax brackets. The higher your tax bracket, the more taxes you'll pay on the imputed income.
• Itemized Deductions: The premiums paid for domestic partner insurance may be allowable itemized tax deductions for medical expenses, but there may be limitations, and they are subject to specific conditions.

Domestic partner insurance for LGBTQ+ couples

Domestic partner life insurance is a way to protect your family financially for specific lengths of time. You can apply for life insurance and gain financial security for your partner without being legally married. In the US, same-sex couples can now legally marry in every state, but domestic partnerships are still available in some areas and offer health benefits to LGBTQ+ couples.

Domestic Partnerships

A domestic partnership is a committed relationship between two people that is officially recognised in some states and municipalities but not by the federal government. It does not confer the same rights and protections as marriage. Some couples, regardless of sexual orientation, choose to enter into a domestic partnership rather than marriage, in the areas where this is an option.

Health Benefits for Domestic Partners

Since domestic partnerships are not recognised or defined by the federal government, the specifics vary by state and city. In some cases, registered domestic partnerships are only available to state or local government employees. In other cases, there are local rules that require plans or employers that offer spousal benefits to also extend them to domestic partnerships.

Insurance Options for Domestic Partners

If you buy your own (non-group) health insurance, the insurer may either allow you to be on the same policy as your domestic partner or require you to have separate policies. This will vary depending on where you live and the health plan you select. Most people who buy their own health insurance do so through the health insurance marketplace. It is also possible to buy individual/family health insurance directly from an insurance company, albeit without marketplace subsidies.

Tax Credits for Domestic Partners

Married couples must file a joint tax return to qualify for a premium tax credit. Domestic partners cannot file a joint tax return, but they may still be able to get these credits by applying for them separately as individuals. Depending on your state marketplace, you may be able to use your individual credits to buy a family policy instead of two individual policies.

Requirements for domestic partner insurance

To enrol a domestic partner in health and/or dental insurance, specific requirements must be met. These requirements vary depending on the state and the employer. Here are the general criteria for enrolling a domestic partner in health insurance:

Age and Consent

Both individuals must be at least 18 years old and legally competent to consent to a contract. This criterion ensures that both parties can legally agree to the terms and conditions of the insurance plan.

Marital Status

Neither partner should be married or in another domestic partnership. This condition confirms that the individuals involved are not already committed to other relationships that could impact their legal or financial status.

Shared Residence

Many insurers require that the couple lives together. Some may even specify a minimum period, such as living together for at least six months. This criterion demonstrates a level of commitment and shared responsibility between the partners.

Financial Interdependence

The couple should be jointly financially responsible for basic living expenses, including food, shelter, and other essential costs. This requirement indicates that the partners rely on each other financially and are invested in each other's well-being.

Relationship Status

The partners must share a close personal relationship and be responsible for each other's common welfare. This criterion goes beyond simply sharing a residence and indicates a deeper level of emotional and practical support within the relationship.

Blood Relation

The partners must not be related by blood in a way that would prohibit marriage under state law. This condition ensures that the relationship complies with legal and ethical standards.

Documentation

In some cases, proof of the domestic partnership may be required through documentation. This could include joint bills, leases, or other evidence of shared financial responsibilities and residence.

It is important to note that the specific requirements may differ based on the insurance company, state laws, and employer policies. It is always advisable to consult with the insurance provider, employer, or a legal expert to understand the exact criteria for enrolling a domestic partner in health insurance.

How to add a domestic partner to your insurance

Domestic partnerships are when two people live together and share their lives as if they were married, but they are not married or in a civil union. People in domestic partnerships can enjoy the same rights and benefits as married couples, including health and life insurance coverage.

If you want to add your domestic partner to your insurance, here are the steps you can follow:

• Check with your employer: Ask your company's human resources department if they offer domestic partner health insurance coverage. Not all employers provide this benefit, so it's important to confirm with them first.
• Understand the requirements: Different employers and insurance companies may have specific criteria for defining a domestic partnership. Common requirements include living together for a certain period (e.g., six months or more), being 18 or older, sharing financial responsibilities, and not being married or in another domestic partnership.
• Provide necessary documentation: If your employer offers domestic partner insurance, they will likely require proof of your domestic partnership. This may include a registered domestic partnership or an employer-defined domestic partnership. An employer-defined domestic partnership typically requires an affidavit confirming your relationship meets their requirements.
• Enroll during the open enrollment period: Once you have confirmed eligibility and provided the necessary documentation, you can add your domestic partner to your insurance during your employer's open enrollment period.
• Be aware of special enrollment periods: In some cases, obtaining an affidavit of domestic partnership may trigger a special enrollment period, allowing you to add your partner outside of the regular open enrollment window. However, this is not always the case, and it depends on the insurance plan and carrier, as well as state requirements.
• Check with your insurance provider: If you are unable to add your domestic partner through your employer, contact your insurance provider directly to inquire about your options. They may allow you to add your partner to your existing policy or require separate policies.
• Explore alternative options: If adding your domestic partner to your insurance is not possible, they may need to consider other options, such as enrolling in their own employer's health insurance plan, purchasing an individual plan through the health insurance marketplace, or exploring government programs like Medicaid if eligible.

It is important to note that the availability of domestic partner insurance and the specific requirements can vary by state and employer. Additionally, there may be tax implications for adding a domestic partner to your insurance, as employer-sponsored health insurance for domestic partners may be treated differently by the IRS. Be sure to consult with a tax advisor to understand the potential tax consequences.

Frequently asked questions