Life Insurance for Same-Sex Couples

Can same-sex couples take out life insurance in Australia?

Yes, same-sex couples can take out life insurance cover for each other. Although same-sex marriage has not yet been legalised in Australia, federal government reforms were introduced in 2008 to grant same-sex couples the same rights and privileges as unmarried opposite-sex couples in “de facto” relationships. The definition of “child” was also broadened to include children born outside of marriage, adopted children, step-children and the child of a spouse, including a de facto spouse.

These changes related to areas like superannuation, family law, taxation and social security, though they also affect the ability of same-sex couples to apply for life insurance.

Is life insurance necessary?

For same-sex couples who rely on the income of one or more partner to pay the bills, life insurance is a necessity. Insurance to cover disability and long-term care can be hugely beneficial for same-sex couples who may not be eligible for family leave to care for a sick loved one, and can take the financial stress out of some very difficult situations.

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Recent Australian legislations have made it possible for same-sex couples to benefit from life insurance

The 2008 legislative changes saw the introduction of three bills to ensure equality for same-sex couples:

  • Same-Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act of 2008
  • Same-Sex Relationships (Equal Treatment in Commonwealth Laws—General Reform) Bill 2008
  • Family Law Amendment (De Facto Financial Matters and Other Measures) Bill 2008

These bills saw the definition of “spouse” to include same-sex partners. In addition, the definition of “child” was changed to better include the children of same-sex couples, and the result of these changes is great benefits for those in same-sex relationships seeking to secure life insurance cover.

How does this affect superannuation?

In terms of superannuation, same-sex de facto partners or the children of either partner can now receive superannuation death benefits (including life insurance proceeds) tax-free. A same-sex partner can now contribute to a partner’s superannuation account as a spouse, while a same-sex partner can now also qualify for a spouse contribution tax offset.

The changes also impacted on insurance held outside of super. The new definitions now allow same-sex partners and the children of same-sex partners to receive TPD and trauma proceeds tax-free. The Life Insurance Act 1995 was also amended to increase the rights of same-sex couples.

What other superannuation benefits can same-sex couples take advantage of?

Some of the key benefits that same-sex couples can take advantage of include:

  • Superannuation contributions splitting. Same-sex couples can now boost their partner’s retirement savings by making contributions into their spouse’s account. Same-sex partners can now make after-tax contributions of up to $3000 on behalf of their spouse and be entitled to a spouse contribution tax offset. However, their spouse’s assessable income must be less than a certain limit.
  • Life insurance death benefits through super. The law changes also affected the payment of death benefits. In the past it was highly unlikely that a same-sex partner could receive a death benefit if their spouse passed away. Now, however, if a spouse dies, gay partners and their children can now receive the death benefit payment from their partner’s super fund. On top of this, same-sex partners now also receive the same death benefit tax concessions that opposite-sex couples do when they receive a superannuation lump sum death benefit payment.
  • Clearer eligibility rules. If you’re looking to establish a SMSF, the eligibility rules for same-sex couples looking to do so are now much clearer. A same-sex partner is now considered a “relative” under SMSF regulations, while anti-detriment rules now apply to the dependant of a same-sex partner.
  • Relationship breakdown. Finally, in the event of a relationship ending, same-sex couples can now take superannuation assets into account when splitting up.

Do the new reforms also affect Life Insurance owned by same-sex couples outside of super?

The new reforms also had a significant influence on life insurance owned by same-sex couples outside of superannuation. Term life insurance has typically provided better chances for same-sex couples to provide death benefits to their partners, largely thanks to the ability of policyholders to nominate their beneficiaries.

However, in the past, same-sex partners were taxed for the payment of proceeds from TPD and Trauma insurance policies. But with the introduction of the changes, the life insured’s same-sex partner or a child of the same-sex partner is now able to receive TPD and trauma benefit payments tax-free. This now offers gay couples the same rights as those granted to opposite-sex couples.

The Life Insurance Act 1995 was also amended to further extend the rights of same-sex couples. The protection against creditors now also extends to the rights and interests of a same-sex de facto partner. In addition, term life insurance policy proceeds paid where there are single or multiple life policies not exceeding a total amount of $50,000 and payable to a deceased’s legal personal representative, may now be paid to same-sex de facto partners in a simpler and quicker manner. The need to endure probate or administration of the deceased estate is no longer required.

What are the key underwriting requirements for gay couples?

When assessing a life insurance application from a same-sex couple, an insurance provider’s underwriter will be required to take a variety of information into account including details about your:

  • Age
  • Gender
  • Lifestyle habits
  • Occupation
  • Medical history

Why should same-sex couples should consider life cover?

Life insurance is an essential expense for any couple. It offers financial security for you and your family if illness, injury or even death turn your world upside down, allowing you to concentrate on the important things in life instead of worrying about money. Now, with the recent legislation changes, same-sex couples now receive many of the same rights opposite-sex couples do when it comes to life insurance.

Designed to protect the interests of families of all shapes and sizes, life insurance should now be on the financial planning checklist for same-sex couples. Other things to include on your checklist are:

  • A cohabitation agreement. This agreement between you and your partner specifies how you will share financial responsibility and handle the division of finances should your relationship break down.
  • Co-parenting agreement. This specifies how you will share the financial responsibility of caring for your child.
  • Wills. You’ll need separate wills to organise what will happen to your assets when you’re gone.
  • Living wills. These name your medical power of attorney in the event that you are unable to make them, and also specify your preferences in terms of medical intervention on your behalf.
  • Powers of attorney. If you die or become unable to act on your own behalf, these documents authorise your partner to make legal and financial decisions for you.
  • Investment plan. Lay out a plan to meet your family’s long- and short-term financial needs.

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Maurice Thach

Maurice is a publisher for Daily research of Australia's insurance offerings allows him to breakthrough the noise of the many policies out there to uncover what can (and can't) be covered. Maurice hopes to make finding the right insurance easier for all.

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