Home sweet home: Insurers are examining the risks and advantages of writing joint homeowners and renters policies for unmarried domestic partners. (Property/Casualty).

Catherine Reuben, an attorney in Somerville, Mass., and her domestic partner, Scott Glanzman, wanted renters insurance to cover themselves and their belongings in the apartment they shared. Since they were partners, although not married, they wanted a single, joint policy. They went through the Nancy Bender Insurance Agency in Boston and got what they wanted. "I didn't even know there was an issue," Reuben said.

For Amber Settle and her domestic partner in Chicago, the experience was not as favorable. Metropolitan Life required them to buy two individual policies, explaining it was against the company's procedure to allow unmarried people to share a renters policy, Settle said.

Marshall Miller and Dorian Solot had joint renters insurance in Providence, R.I., but when they moved to Massachusetts, a local agent declined to write a joint policy, because they weren't married. "It was things like this that inspired us to realize there needed to be an organization like the Alternatives to Marriage Project to address situations when they come up," Miller said. Miller and Solot founded the Alternatives to Marriage Project, a national nonprofit organization that advocates for equality and fairness for unmarried people, in 1998.

According to the 2000 Census, there are about 11 million unmarried people living with a partner in the United States. This number represents a 72% increase over the approximately 6.2 million unmarried partners in 1990. There are a variety of reasons for the change in demographics. Some people choose not to marry Others can't legally marry. "It's not just a change in society; there's an economic basis as well," said Dan Hattaway, homeowners program manager for State Farm.

The increasing number of unmarried partners means more requests for joint renters and homeowners policies. "It's not that unusual to receive this kind of request," said Steven D. Chandler, vice president and personal lines manager for Maine Mutual Fire Insurance Co. in Presque Isle, Maine. Based on direct premiums written in 2000, Maine Mutual is the No.4 writer of homeowners multiperil insurance in Maine, which, according to the Alternatives to Marriage Project, has a higher percentage of unmarried couples living together than any other state.

The critical issue for insurers is whether to deviate from the standard policy form and include both partners as insureds.

Most policies define "insured" as the named insured--the person whose name is on the deed to the house in the case of a homeowners policy--and any other residents who are relatives by blood or marriage or who are under the age of 21 and in the care of the named insured. Beyond those relationships, insurers look for insurable interest.

"Insurable interest" is a very basic tenet, in that to get a homeowners policy, a person must have a financial interest. "You have to have something to lose," Hattaway said. "If you own the home and it burns down, you have suffered a loss. If you don't own the home, then you don't have any insurable interest. You've lost nothing."

State Farm, based in Bloomington, Ill., uses the same homeowners policy for unmarried domestic partners as for married couples and singles. The partner is written into the policy as a person with an insurable interest. "Our position is that if the person who owns the house wants that other individual as a named insured, that individual has an insurable interest because the owner recognizes they have an insurable interest," Hattaway said. As a named insured, the partner has all the rights and coverages of the policy, including liability and living expenses. State Farm also will name both partners as insureds on a single renters policy.

Not all insurers, however, agree with the practice. "I have one company that will let me write domestic partners for renters insurance as long as they have an established relationship," said Iris Lynch, an agent with CAL Insurance & Associates, San Francisco. "I have approached other companies and had difficulty."

A Look at the Risks

The challenge that insurers face in writing joint policies for unmarried domestic partners involves which partner has insurable interest for property or an auto when a loss occurs, said Raphael Madison, assistant vice president, property/casualty marketing, and head of the Diversity Initiative at Safeco Corp., Seattle. The difference with married people is that according to most state laws, their property becomes joint property.

Safeco requires renters who aren't married to purchase individual policies, Madison said.

Insurers also may worry about the liability that is on the policy. "They try to do it without chastising people for their lifestyle, but basically what they're saying is, it's lifestyle," Lynch said. "You don't know what type of friends they have, and so forth."

From a consumer point of view, one partner may run the risk of having difficulty collecting payment, particularly if the couple has separated, Chandler said.

With homeowners policies, the property risks also come back to insurable interest. "Insurable interest is determined by who has financial interest in the home," Madison said. The insurer can run into problems if it sends the insurance policy with two names to the mortgage company and the mortgage company only recognizes one of them as the owner.

"There's no way we can add a partner to the insurance policy unless they add their name on the deed, because, technically, there is no insurable interest," Madison said. In cases where a partner's name is not on the deed, that partner needs to purchase a renters policy to protect his or her property and cover his or her liability, he said.

If the insurance company chooses to write a joint homeowners policy in situations where there is only one name on the deed, the agent must make sure the owner understands the consequences if there is a loss, said Nancy Bender of Nancy Bender Insurance Agency. The house could be destroyed, and the claim check will be issued in both names.

Education is often an important factor in meeting the insurance needs of unmarried partners. The partner who buys the homeowners or renters insurance may not realize the other partner is not covered. "They may have established a relationship after one bought the house," Lynch said. "Why would the owner think, 'Oh, I need to call Iris and tell her John is living with me?' He assumes John is covered." The consequences of that assumption, however, can be serious. For example, if the owner has the insurance and John has a dog registered in his name and that dog bites someone, there's no liability coverage.

Joint Underwriting

Doing a lot of underwriting for joint rental policies for unmarried domestic partners is not cost effective, said Maine Mutual's Chandler. "Our approach is to rely on the front-line agent. The agent must determine that there is a long-term relationship," he said.

"If [an unmarried couple] asks me for renters insurance together, I have to ask if they have been together for a number of years," Lynch said. "They say yes, and that's all I ask them. I've never been asked for proof...We don't ask for proof of marriage."

For a joint homeowners policy State Farm reserves the right to underwrite the second named insured in the same way as the first. "We don't restrict it, because they are an unrelated individual. We do not require an affidavit as to the length of time the people have lived together," Hattaway said. The company is interested in the person's loss history, coverages he or she may need and liability exposures, such as day care conducted in the home or professional nurses' liability. "I don't think there are more or different challenges to underwriting an unmarried couple than there are to underwriting a married couple," he said.

"I make the underwriting decision before approaching the company," Bender said. "I write certain homeowners policies with the proper underwriting for domestic partners with Chubb." Although she may need to know how long the couple has been together, she doesn't think unmarried partners pose greater liability. "There's not as much risk as if they are married and have four kids," she said. Some of the advantages of writing policies for unmarried partners are that they are usually both professionals and they have disposable income and, therefore, more to insure.

"My professional lesbians are one of my most profitable businesses. I wish I had more," Bender said.

The advantage of writing joint policies for unmarried couples is that the company meets customers' needs, Hattaway said. State Farm is still looking at how it writes the policies. "Our definition of 'insured' probably needs some work, because it's not automatic. We're looking at ways now to take care of that situation," he said.

State Farm filed an endorsement to amend its policy so that it recognized a recent law in Vermont, Hattaway said. In December 1999, the Vermont Supreme Court ruled in Baker vs. State that "the State is constitutionally required to extend to same-sex couples the common benefits and protections that flow from marriage under Vermont law. Whether this ultimately takes the form of inclusion within the marriage laws themselves or a parallel 'domestic partnership' system or some equivalent statutory alternative, rests with the Legislature."

The Vermont Legislature then passed the "Act Relating to Civil Unions," effective July 1, 2000, which permits eligible couples of the same sex to be joined in civil unions and extends to parties in a civil union all the same benefits, protections and responsibilities under Vermont law as are granted to spouses in a marriage.

The Vermont Department of Banking, Insurance, Securities & Health Care Administration followed with a ruling requiring that "insurance contracts and policies offered to married couples, spouses and families also be made available to civil union couples, parties to the civil union and their families."

"I wouldn't go so far as to say our policy wouldn't have recognized the law without [the endorsement]. It just simplified things," Hattaway said. State Farm is the No. 4 writer of homeowners multiperil insurance in Vermont.

Co-Operative Insurance Cos., the leading homeowners writer in Vermont, allowed unmarried partners to be named on policies as an additional insured before the civil unions law, said Bonnie Clark, personal lines underwriting manager. "The only difference is that before [the law], they would have to have been listed on the policy to have coverage. Now, if they have a legal union, they don't have to be listed to be covered. They are considered a member of the household," she said.

Whether other states will follow Vermont's lead and pass similar legislation is uncertain. Discussion has arisen in a few states, including in Hawaii and California, but no action has been taken.

As for insurers, there are different opinions as to whether more companies are writing joint policies for unmarried couples now than 10 years ago. Bender sees change. "Little by little, companies are coming around," she said. "If they don't [write joint policies], they're missing business. It's a good market. I think this type of policy will become a trend among companies."

If it becomes a trend, standard policy wording will need revision in most cases. State Farm may amend the standard policy or it may make changes state by state, based on changes in laws as they occur, Hattaway said. Bender suggested that new policy language may be developed to protect companies if there is a problem with a claim.

"Our expectation is that it will continue to be a legislative and political issue, so we had better stay ahead of the curve. I can't speak for the industry, but at some point, each insurer is going to have to at least look at the issue and make their own decision about how they're going to address it," Hattaway said.

Top Homeowners Multiperil Writers In States With Most Unmarried Domestic
Partners

The states listed below have the highest percentages of unmarried
couples living together, according to the Alternatives to Marriage
Project, based in Boston. The top writers are drawn from 2000 data from
A.M. Best Co.


                                        Direct Premiums     Market
                                         Written ($000)  Share (%)
1. Maine

     Commercial Union York                      $30,992      20.05
     State Farm Fire & Casualty                  13,945       9.02
     Allstate                                     9,953       6.44
     Maine Mutual Fire                            9,823       6.35
     Concord General Mutual                       7,590       4.91

2. Vermont

     Co-Operative Insurance Cos.                 $9,153      10.82
     Allstate                                     6,116       7.23
     Northern Security                            5,728       6.77
     State Farm Fire & Casualty                   5,477       6.48
     Concord General Mutual                       5,268       6.23

3. Nevada

     State Farm Fire & Casualty                 $48,184      22.08
     Fire Insurance Exchange                     48,053      22.02
     Allstate                                    33,863      15.52
     California State Auto Association
       Inter-Insurance Bureau                     9,079       4.16
     United Services Auto Association             5,997       2.75

4. Alaska

     State Farm Fire & Casualty                 $25,330      34.52
     Allstate                                    21,574      29.40
     Safeco                                       4,534       6.18
     United Services Auto Association             3,978       5.42
     Umialik                                      3,032       4.13

5. New Hampshire

     State Farm Fire & Casualty                 $14,355       9.10
     Peerless Insurance                          10,489       6.65
     Concord General Mutual                      10,448       6.63
     Allstate                                    10,140       6.43
     Liberty Mutual Fire                          7,331       4.65

Sources: Alternatives to Marriage Peoject; U.S. Census Bureau, 2000
Census; A.M. Best State/Line Products