Survivorship life insurance, or second-to-die life insurance, is a type of life insurance policy that allows you to cover both you and your spouse. This means that, when you both pass, your family will receive death benefits from both of you. In other words, while you will both be named on the policy, death benefits will be paid to your family only after both of you have passed. If you think this type of policy might be beneficial to your family, read on to find out how it works.
The Basics
Survivorship policies were introduced in the early 1980s following a change in the tax law, which allowed couples to defer all estate taxes until the second partner died. This type of policy is generally sold as whole life, universal life, or variable universal life insurance policy. So what makes it different from other policies, and why might it be a good choice for your family? Because it does not pay out until both policy owners have died, it provides a much bigger death benefit than two individual policies would be able to do for the same premium.
Survivorship Life for Estate Planning
There is also another benefit to survivorship life insurance, especially if you plan on leaving a large estate behind for your family. If you have an estate that exceeds the exemption equivalent of the estate tax unified credit, your family will have to pay an estate tax on the amount that exceeds the exemption. A survivorship life insurance policy will help pay this tax, while also leaving your family an extra financial safety net.
And there won’t be any issues with having to pay extra taxes on the death benefits: your death benefit will be paid directly to the trust, and will not be treated as part of the estate or inheritance. Again, this is especially beneficial for families with a high net worth who want to avoid or minimize any estate tax consequences.
Survivorship Life For Parents of Special Needs Children
Survivorship life insurance can be beneficial for those looking to protect their estates, but they are also an excellent choice for parents of special needs children. Having one of these policies can ensure that your children’s needs will be met and they will be cared for if both parents should die. If you are considering survivorship life insurance for this purpose, you should draft a letter of intent to provide instructions to your trustee and the person you will make the guardian of your children, so that they will know how to care for your child and how your assets should be distributed.
Is It Right For You?
If you are considering a survivorship life insurance policy, there are a few things you need to consider. For example, you need to remember that your policy’s death benefit won’t be paid out until both policy owners have passed away. So if your spouse passes, you could find yourself struggling financially, because you won’t receive any benefits to help page your debts, bills, or other expenses. If you’re worried about this, survivorship life insurance might not be right for you.
Customizing Your Policy
If you do decide that a survivorship life insurance policy is right for you, you should know that these policies can be easily customized with riders that you can add to the policy, including:
- Accelerated death benefit– This rider will pay a portion of the death benefit to the insured to help pay for expenses if they are diagnosed with a terminal illness.
- Policy split option- This will allow you and your partner to split the death benefit into separate policies if you get divorced.
- Estate protection rider- This provides additional term life insurance that will offset the effect of federal or state taxes on your death benefit.
Unsure which policy is right for you and where to begin? Because there are so many different life insurance policies to choose from, you have to compare plans to find the best one for your needs. Consider using online tools, or speaking with an agent. We have provided the top insurance companies that offer joint life insurance policies below; each can give you hassle-free assistance and the most competitive rates in the nation. Always check multiple sites to ensure that you have bargaining power and know the advantages of each company. Make sure a hard time isn’t made harder by a financial burden, check joint life insurance rates today.
