Tag Archives: life insurance

Marriage rate at record low: 10 risks we take when we live together

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  • The marriage rate of opposite sex couples was the lowest on record in 2018, with 20.1 per 1,000 unmarried men and 18.6 per 1,000 unmarried women.
  • In the previous 10 years, marriage rates had fallen most among those under the age of 20: down 57% for men and 63% for women.
  • The average age to get married is rising – in opposite-sex couples, men married at an average age of 38.1, and women 35.8 years.
  • There were 234,795 marriages in 2018 – down 3.3% from 2017.
  • Since 1972, the annual number of opposite-sex marriages has fallen 46.5%.

The Office for National Statistics has published marriage statistics for 2018 today.

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Sarah Coles, personal finance analyst, Hargreaves Lansdown

“Marriages hit a record low in 2018, as more people decided it was better to live with their partner first for a few years than live with a bad decision forever. But as more couples move in together for longer without tying the knot, they need to understand the ways it can make them vulnerable.

Separate ONS statistics show that among those under 30, more than two thirds of couples are living together without getting married, along with one in five couples in their 40s and one in ten people in their 60s.

There are all sorts of reasons why people choose to marry or live together, and nobody would suggest marrying for money. However, if you are living together you need to understand the financial risks you face. You could be in for a horrible surprise if you split up, or fall foul of rules you never knew existed if your partner was to die.

The good news is that you don’t have to rush into marriage to protect yourself, because there are steps you can take to cut your risks, whatever your marital status.

10 risks of living together

  1. If one of you dies without a will, the other could get nothing. If the home is in their name, you could lose your home too, because everything passes to your partner’s children. If they have no children, everything in their name will pass to their parents instead.
  2.  If you have a pension which is meant to pay out to a spouse when you die, some pensions don’t allow this to be left to an unmarried partner. Some will allow you to complete a ‘nomination of beneficiaries’ form, to ask for anything to pass to your partner, but if you don’t complete the form there are no guarantees that this will happen.
  3. If you have children, the father isn’t on the birth certificate, and the mother dies, the father doesn’t automatically have a right to care for the child.
  4. If one of you dies and leaves everything to the other, in a marriage or civil partnership this would all be free of inheritance tax. If you’re not married and you breach the inheritance tax nil rate band, there could be tax to pay. In some cases, this could mean you can’t afford to stay in your home.
  5. There are no inheritable ISAs. If your spouse holds an ISA on death, you will get an additional ISA allowance – called an Additional Permitted Subscription, which essentially means ISA assets they leave you can all be wrapped up in an ISA again without affecting your allowances. If you’re not married, you don’t get this extra ISA allowance.
  6. If you split up and one of you owns the house in their name, the other may have no right to live in it or to a share of the property.
  7. On the flip side, if the property belongs to one of you entirely, but the other has contributed towards it in some way – including paying a share of the bills or helping with home improvements, they can claim an ‘interest’ in it, and go to a court for a share of the property. It means couples who move in together may have made a bigger commitment than they appreciate.
  8. If you split up, and one of you has sacrificed their career for caring responsibilities, they have no right to spousal maintenance. On average, women’s pay falls 7% for each child they have – so without maintenance to make up the difference, this could leave them thousands of pounds worse off each year.
  9. In the event of a split, if one of you has a sizeable pension and the other has nothing, there’s no compulsion to share.
  10. There are tax disadvantages. We all have a personal allowance that’s not subject to income tax, a personal savings allowance, a dividend allowance and a capital gains tax allowance. Married couples can share assets between them to take advantage of both people’s allowances, and the lower taxpayer can hold the balance. If unmarried couples try to do this, sharing the assets could trigger a tax bill.

How to protect yourself

Make a will

The only way to ensure an unmarried partner inherits is to draw up a will so that your assets are left exactly as you want them. While it’s vital that everyone makes a will, the stakes for unmarried partners are even higher.

Think carefully about how all assets are owned

If one of you moved in with the other, and the home remains in their name, have you contributed financially? Financial contributions can be reflected by switching to own the property as tenants in common. This allows the financial contribution to be reflected accurately in the proportions of ownership. Also think before taking on any debt: if the loan is for the benefit of both of you, it should be in both names. And consider your savings, if you’re saving together, it should be in both names.

Consider a co-habitation agreement

This will lay out all kinds of things, from how you manage money between you to who owns what in the relationship. It can also iron out what will happen in the event that you split up.

Ensure both parents have parental responsibility

Fathers can protect themselves by being there when the birth is registered, and being on the birth certificate. If it’s too late for that, you can agree parental responsibility between you and complete the form . If you can’t agree, you may need to go to court.

Take out life insurance

Both of you should have enough insurance to ensure the children are provided for in the event you die. After a split, the resident parent should have cover and if one of you is paying child support, they should have cover that will replace it in the event of their death.

Build a nest egg for your child

One of the best ways to protect your child against whatever the future holds is for them to have savings and investments in their own name. The Junior ISA can be a really sensible option. Nobody can access the money until they are 18, and at that point it belongs entirely to the child. While the money is saved or invested it grows free of tax, and there’s no tax to pay when it’s withdrawn either.”

  • There were 6,925 marriages between same-sex couples, of which 57.2% were between female couples.
  • 803 same-sex couples converted their civil partnership into a marriage.
  • 21.1% of opposite-sex marriages in 2018 were religious ceremonies, the lowest on record.

 

10 frequently asked questions about life insurance

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Life insurance offers an effective way of helping your loved ones lead a comfortable life when you pass away. Usually, your beneficiaries receive a lump sum amount or monthly payouts to help them take care of daily expenses, mortgage or even your funeral costs.

If you’d like to learn more about life coverage, the following 10 FAQs are a good place to start.

What is term life insurance and how does it work?

This is the most common type of insurance designed to protect your loved ones if you pass away within the agreed duration in the policy. It helps settle any financial burden the beneficiaries could face due to the loss of your income.

Put simply, you pay a monthly premium to your insurance provider within the specified term, and upon your demise, your beneficiaries will receive a payout. For example, if you take a life insurance policy for 25 years, your family can claim it if you pass away within those 25 years.

Can I get life insurance through my employer?

It’s common for many employers to provide life insurance in what’s referred to as a ‘death-in-service benefit. As with regular life insurance, it pays out a lump sum if you pass away while in employment and is usually four times your annual salary. While this is sufficient, you might need additional cover depending on certain factors like the amount of mortgage you owe or any other financial provisions for your beneficiaries’ future.

Does the life insurance payout stay the same regardless of when you pass away?

Well, this depends on the policy you take out. For example, in the case of level term insurance, the payout is the same whether you depart in the first year of the policy or the last. For a decreasing term insurance policy, however, the payout becomes smaller over the years. This is suitable for repayment of mortgages because the amount of mortgage also decreases over time.

Can I buy life insurance that will pay whenever I pass away?

Yes, you can buy Whole of Life insurance or what’s known as life assurance. This allows your family to claim your policy regardless of when you depart. For this reason, life assurance is normally more expensive than term life insurance because it’s a guarantee that the insurer will pay eventually.

How much does life insurance cost?

Your needs will determine the life insurance cover you take out. The premiums also vary depending on the type of policy, the risk of the claim and the sum insured’s size. Besides, older persons will pay a higher premium than their young counterparts. Similarly, a person in poor health can expect to pay a higher premium than those in healthier states. Other factors that insurers consider include hobbies, occupation and lifestyle (whether you smoke and your weight).

Can the policy payout regular income rather than a lump sum?

Sure! You can go for a family income benefit. With this plan, your beneficiaries will receive a monthly payout if you’re diagnosed with a critical illness or pass away during the contract period.

Can I still get a policy if I’m older or have a preexisting condition?

Yes, but the cost of premiums may be higher as a result. It’s still possible to buy life insurance when you’re over 50 years and some firms will even accept you without health questions.

Will a life insurance policy always pay out a benefit?

Many policies feature payout exclusions e.g. suicide or drug-related death. Insurers may also decline to pay in case of non-disclosure where the insured has not notified the insurer of changes. For instance, the policy would be voided if the individual claiming began smoking after being insured but didn’t notify the insurer.

Do I need life insurance if I am healthy and young?

When taking out life insurance, the most significant factor is whether anyone else will lose financially upon your passing away. Do you have family members who would struggle to take care of household expenses? Will your partner be able to pay for your joint mortgage if you departed today? All these are critical questions to ask yourself. Regardless of your age, life insurance is necessary if someone relies on you for financial support.

Should people with mortgages buy life insurance?

Yes, this is one of the few reasons why you should consider a life insurance policy. It provides reassurance to your loved ones that their home is safe even after you’re gone.

Can I make changes to my policy?

While you can usually make amends to your life insurance policy, this could raise the premiums. You should also update your insurer about any changes concerning marriage, a new home or a new addition to the family.

Have another new question that we didn’t answer in this guide? Let us know in the comments and we’ll be happy to add it here.
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