Over two-fifths of unmarried couples will lose out on life insurance pay-out if their partner dies

Financial advisers are being urged to help couples take a fresh look at their finances in 2023 following new research from Scottish Widows that revealed poor planning could see as many as 43% of people in unmarried relationships lose out on life insurance pay-outs.

Related topics:  protection news,  life insurance
Warren Lewis
4th January 2023
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According to the research, just 52% of unmarried adults who are in relationships know whether their partner has a life insurance policy, with 27% of those who do know unaware of the policy’s value. In addition, 34% of couples admit they rarely discuss long-term financial planning because they see it as unnecessary, awkward, or simply too difficult. This increases to 40% among those over 55.

With UK marriage rates declining by 50% since 1972, it’s more crucial than ever for couples to discuss how their relationship will affect their future finances. Financial advisors have a key role in making sure these conversations happen in a safe and positive way.

Many people may not automatically be entitled to their partner’s life insurance payout in the event of their death, so failing to discuss finances could jeopardise financial security in the long term.

There is also a lack of awareness when it comes to expectations and preparations needed to receive financial protection. Among married people who live with their partner, 19% would expect to receive life insurance pay-out, despite just 14% knowing that their partner had definitely put plans in place for this.

Same-sex couples are more transparent when it comes to money

The research also shows that same-sex couples are more likely to discuss their finances – showing a greater level of communication. Nearly a quarter of married same-sex couples (24%) discuss long-term financial matters on a monthly basis. However, married opposite-sex couples only do so every two or three months.

The result of this is that people in both married and unmarried same-sex couples are likely to know more about their partner’s finances. Among married same-sex couples, 60% know how exactly how much their partner earns, compared to only 53% of people married to someone of the opposite sex.

However, all levels of awareness are lower among couples who are not married. The proportion of people who know exactly how much their partner earns drops to 47% for same-sex couples and 45% for opposite-sex couples among couples who are not married.

This trend of unmarried couples knowing less about each other’s financial plans reinforces the importance of impartial, specialist advice that can facilitate these crucial conversations and help couples discuss their protection. Otherwise, many people risk losing out on the entitlement to their partner’s life insurance payout that many of them would expect in the event of their partner’s death.

Rose St Louis, Protection Director at Scottish Widows, said: “Our research has shown that unmarried couples find it difficult to talk about planning for the worst and proactively avoid it as they don’t feel it is important. However, despite being difficult to discuss, there is an urgent need for transparency to ensure long-term security.

“As marriage rates continue the decline, financial advisors have a crucial role to play by supporting couples sensitively through this process and ensuring they understand the different protection offered to them. Helping to facilitate these conversations so they can handle the issue sensibly and sensitively is an integral part of professional advisors' role in today's society.”

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