Second to die life insurance is also known as survivorship life. This refers to a life policy or combination of policies that serve the purpose of insuring two or more people. The face value is paid when the last insured dies. Second to die life insurance is typically used to cover husbands and wives lives. Although buyers normally choose permanent life policies, some insurance companies cater for term survivorship as well.
Using Second to Die Insurance
Second to die insurance is widely used for various reasons.
- For estate planning purposes, especially when there is a substantial estate. Unlimited marital deductions defer or lower federal estate tax. This type of insurance offers estate liquidity when the second death of a couple occurs.
- Protect spouses who have successful careers from the loss of income in case they both die.
- It provides protection for companies against the possibility of loss of employees such as top executives.
- Funding charities.
Advantages of Second to Die Insurance
Second to die life insurance features numerous advantages.
- Premiums are significantly lower and cost less than issuing two individual policies.
- A number of permanent or alternative term life combinations can provide flexibility for premium payments and death benefit settlement options.
- When applied with marital deductions, it is an effective tool for waiving estate taxes.
- Since the face value of a second to die policy is not paid until the second covered person dies, medical standards are typically lenient for one of the insured people.
Policies Designed for Couples
Married couples that want to find a way to reduce the costs that are associated with life insurance or want to protect their estate from taxes upon their death should consider investing in joint life insurance. Joint policies are not as commonly used as individual life insurance but more people are becoming aware of their benefits.
A joint policy is designed to make it possible for two people, usually spouses, to share a single life insurance plan. This type of insurance is available in the form of first to die that pays out to surviving spouses when the first one dies. Second to die pays death proceeds to heirs when the spouses are both gone.
Protecting your Heirs
Second to die is useful for helping to pay estate taxes or giving children a financial legacy. On the other hand, first to die is geared towards young couples who have children and want the ability to replace lost earnings that were provided by a deceased parent.
- Consumers can purchase joint policies as term life insurance that covers a number of set years. Alternatively, permanent life insurance protects one or two souses for a whole lifetime.
- Second to die life insurance is provided by various insurance and usually targets affluent people who are concerned about the possibility of heft estate taxes that will be charged on what is left behind.
- A joint survivorship policy is more affordable than an individual life policy with varying premiums and savings that are based on the insurance company, the age and health status of people being insured.
- Along with being economical, a second to die policy also provides protection for individuals whose health may prevent them from qualifying for an individual life insurance policy.