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Second To Die Life Insurance

Who Needs Survivorship Insurance

Second to Die Life Insurance Policies: Are They Good for Estate Planning?
  • If youre a high net worth family, and you know your heirs will be hit with heavy estate taxes.
  • Or even if you think it slightly possible that your heirs will be hit with the estate tax, you are an ideal candidate for survivorship insurance.
  • In addition to those that have high net worth, those that have a desire to pass on a significant legacy to their heirs or to a charity would also benefit from a second to die policy.
  • Additionally, perhaps you are a business owner and you do not want the business to be liquidated upon your passing.
  • Or maybe you are an investor and a great deal of your wealth is tied up in income producing assets.

Survivorship life insurance is ideal when you do not need the money to go to your spouse but rather you need it to go to your estate or business to provide needed liquidityupon the passing of two people.

Having said all this, it is important to have a basic understanding of the estate tax.

So, What Exactly is the Estate Tax?

The federal government has a set limit on family estates that are passed down to the heirs. If the estate is below the exemption limit, the heirs do not have to pay the estate tax. For the amounts over the exemption limit, the estate tax is assessed.

This exclusion limit is important because the estate tax is rather heavy, currently at 40%, but it has been as high as 55% since 2000.

Exclusion Limit

Why You Might Need It

Survivorship insurance is among the many different products that are meant for life insurance coverage. Take a situation whereby you and your spouse dies unexpectedly leaving behind a large estate to be inherited by your family members. Do you know how much debt burden you will have passed to your loved ones?

Remember that estates that are larger than average usually attract huge taxes. So, if there is no alternative to cater to such big debts, then the only option would be to sell out the estate, which is indeed a huge loss to the entire family. That is why married couples are advised to purchase survivorship policies, which are specifically designed for estate planning and preservation.

In essence, if you have a lot of assets and you know very well that your heirs will be overwhelmed by heavy estate taxes, then you are the right candidate for survivorship insurance. In other words, the second-to-die life insurance is used by couples in estate planning. The aim is to protect the inheritors from the burden of estate taxes. As such, the importance of this type of life insurance is that the death benefit can be used to offset inheritance taxes once the last parent dies.

Second-to-die life insurance is a sure way for married couples to offer financial protection to their loved ones. These policies are different from the traditional life insurance policies in the sense that they cover only two people, usually married couples.

They Can Secure A Child With Special Needs

It would be wise to consider a second-to-die policy if you have a child with special needs. The death benefits that come with it can be used for taking care of the child and providing for all of their needs.

Similar to an irrevocable trust, after the death of the first spouse, the second spouse will not have access to this money, which means that it will only be kept for the child.

In fact, that is the best way to go about this is to set up an irrevocable trust that will include the policy.

This means that the insurance proceeds of the death benefit will not be taxed. An irrevocable trust will also ensure that the policy does not change any of the benefits that the child with special needs enjoys from the government.

There are two sides to every coin, so survivorship insurance policies also come with their downsides.

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What’s So Great About An Independent Agent

Insurance policies can be complex and confusing, and let’s face it, browsing and discussing second-to-die life insurance policies can be downright depressing. Independent agents exist to simplify the process and save you some grief.

Independent agents are there to make sure you get the absolute best deal, and the one that meets your unique needs. They shop and compare insurance quotes for you, and they’ll break down all the jargon so that you understand exactly what you’re getting.

Divorce Can Make Things Messy

Second to Die Life Insurance Policies: Are They Good for Estate ...

A couple with survivorship life insurance needs to understand that a divorce can create some issues for both insureds. Although no longer together, the life insurance remains in force and premiums need to be paid so the policy will not lapse. If either insured decides to remarry, the new spouse may or may not be comfortable with paying on life insurance for a previous spouse. If this happens, the insured couple should seek advice from an insurance agent and discuss their options with the policy.

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Uses Of A Second To Die Life Insurance Policy

One of the best ways for affluent married couples to provide financial protection for their families is by purchasing a second to die life insurance policy,” otherwise known as a survivorship policy or joint-life insurance policy.

These policies differ from traditional life insurance policies because they insure two people , and they only pay out when the surviving spouse dies.

When purchasing a second to die life insurance policy, you should always stay away from term insurance. Term insurance policies usually expire by the age of 80, so the odds are too high of outliving it. Survivorship life insurance policies only pay out when both people pass away, and many females live into their 90s.

To properly set up your survivorship policy, or second to die life insurance policy, you will want to purchase a permanent life insurance policy. Make sure your policy has fixed rates and no cash value.

The cash value will not to protect your loved ones. If you pass away before withdrawing your cash, the value is lost. If you withdraw the money in your policy while you are alive, the insurance policy payout is reduced.

In the next section, we’ll discuss how survivorship life insurance policies work.

Subject To Marital Changes

Most couples plan to stay together until death. However, life changes, spouses split up, and marriages break. What you should know is that these changes do not change the terms of agreement of the policy.

Even when a couple decides to get a divorce, the policy continues to remain active until they default on the premiums. It would be quite a loss if, after a decade of paying the premiums, the insureds let it lapse.

Parents can agree to continue paying the premiums, but sometimes this situation is affected if the new partners of the insureds do not want the arrangement to continue. Nonetheless, the policy can always be sold, as I mentioned earlier.

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Pros And Cons Of Joint Survivorship Life Insurance

There are several advantages of a joint survivorship policy, including these pros:

  • Estate planning: A survivorship life insurance policy can help in estate planning as a means of leaving money and assets behind while potentially accessing some tax advantages. Consult a tax advisor to understand the tax implications of survivorship life insurance.
  • Creating an inheritance for heirs: A survivorship policy can be a way to leave a nest egg for your heirs to claim once you and your partner have passed away.
  • Providing care for permanent dependents: If you and your partner have a permanent dependent, a survivorship policy can be used to provide for them once you’ve both passed.
  • Two individual policies are too expensive: A survivorship policy can be more affordable than getting two individual permanent life insurance policies, potentially allowing you to purchase more coverage than you’d otherwise be able to.
  • Trouble getting a policy: If one of you is having trouble qualifying for life insurance due to your age or health, a survivorship policy can be a way to get coverage or to increase the coverage you’re eligible for. That’s because both policyowners will be factored into your eligibility rather than just one.
  • Partner can use cash value: While the death benefit can’t be paid out until both people on the policy have died, the surviving partner can tap into the policy’s cash value, if needed, via a life insurance loan.

What Are The Advantages Of A Second

Second To Die Life Insurance – Why I Am A Huge Fan
  • The surviving spouse doesnt have to worry about paying hefty estate taxes when their partner dies.
  • Less risk for the insurance company if one partner is seriously ill since the payout will only come after the second death. This could mean a lower premium for couples with one unhealthy partner.
  • Joint life insurance policies can end up being cheaper since they’re one policy with only one premium. Premiums are also typically lower for joint plans than for individual plans.
  • It’s easier to qualify for joint coverage than for individual plans. This is especially true if one partner is in poor health since only one payout means less risk for the insurance company.
  • It can be used to build an estate, not just to protect an existing estate from taxes. The policy is set up to ensure that your beneficiaries will receive some kind of inheritance, no matter how much of your savings you and your partner spend.
  • Second-to-die policies can help keep a family home in the family, since surviving heirs won’t have to worry about selling the property to pay off taxes.

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What Is The Difference Between Joint And Second

Joint life insurance involves more than one insured individuals on the same policy. Joint life can be written either as first-to-die or second-to-die. In the former, the policy pays out when either of the insured passes away. In the latter, it only pays out after the second insured has also passed away.

How Is Survivorship Universal Life Insurance Used

The survivorship universal life policy can help with:

  • Charitable giving. You can donate money to a charity you care about long after your death.
  • Supporting a disabled child. Couples who support an individual with a disability often set up a Special Needs Trust with a survivorship policy to ensure their child continues to receive care.
  • Business transition planning. It can provide the funds to compensate members of the family that are not interested in continuing the business.
  • Estate planning. With smart estate planning, death benefits will typically pass income tax-free to heirs, which can help in funding mandatory federal estate taxes.

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Which Type Of Life Insurance Is Right For You

Second to die life insurance is only one kind of life insurance that you can choose from, and for a lot of applicants, they are the best choice. Luckily, there are several other kinds that you can choose from.

The most popular type of coverage is a term life insurance plan. These policies are bought with an expiration date attached to them. One significant advantage of these term plans is that you can buy them to match the length of your debts. You wont have to pay for years of insurance that you dont need, and because they are not permanent coverage, the premiums are going to be lower than other options for coverage.

Another option for applicants is a no medical exam life insurance plan. As you can guess from the name, the plans allow you to get life insurance without being required to take the exam first.

When Should You Buy A Survivorship Life Insurance Policy


There are a few major reasons you might purchase a survivorship life insurance policy:

  • Supplying care for permanent dependents If you have a dependent who relies on you permanently, such as a child with disabilities, a survivorship life insurance policy ensures that youre leaving money behind so they can be taken care of for the rest of their life. The policy could be funded into a special needs trust for the dependent to have some income if both parents are no longer around to support them.

  • Estate planning If you want to leave money or assets behind to heirs or want to allow your loved ones to avoid federal state taxes and income taxes, survivorship life insurance is a good option. The policys main purpose is maximizing your estate and providing liquidity.

  • You cant afford two individual policies For the most part, purchasing a permanent life insurance policy can be 5 to 15 times more expensive than purchasing a term life insurance policy. But permanent survivorship life insurance policies can sometimes be less expensive in the long run.

  • One spouse was declined, but the other is in good health If a couple wants both partners to have insurance coverage but is unable to secure coverage for one of them , a joint policy covers them both under a single policy.

  • Speak to a financial advisor or a Policygenius agent to figure out if survivorship life insurance is your best option.

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    Differences Between Survivorship Life And Other Joint Life Policies

    Survivorship life insurance, also known as second-to-die life insurance, is one of two types of joint life insurance. The other is called first-to-die life insurance.

    Joint life insurance typically covers a married couple or partners in some other relationship. It can sometimes be cheaper than having two individual policies for the partners.

    The chief difference between survivorship life insurance and other types of joint life coverage is about who you want to benefit from the payout.

    First-to-die life insurance pays out after the first partners death. Its payout benefits your partner if you die.

    Survivorship, or second-to-die, life insurance pays out only after both partners have died. Its payout is designed to benefit the couples heirs.

    Second To Die Policy Riders

    The majority of life insurance companies offer their customers optional riders including the accidental death rider, guaranteed insurability rider, waiver of premium rider, and the family income benefit rider.

    These types of riders are very beneficial to the insured and we recommend you consider adding them to your life insurance policy.

    There is usually an additional charge factored into your monthly premium for each rider. However, the financial benefits of these types of riders far outweigh the minimal cost charged by the life insurance carrier.

    Accidental Death or Double Indemnity Rider

    The addition of this rider will double your death benefit amount if you die from an accident. Often the policy will stipulate an age when this coverage will expire. Pay close attention to the life insurance policies definition of accidental, which is often very restricted.

    Guaranteed Insurability Rider

    This provision guarantees the term life insurance policys renewability at the end of its contract. If you decide to renew your policy, you will not be required to provide additional proof of your insurability. This insurance rider may expire at a certain age so be sure to read the fine print.

    Waiver of Premium Rider

    Once you are no longer disabled, you are required to begin paying your premiums again. However, you do not have to go back and pay any missed premiums for the period of time you were disabled. Your life insurance policy will clearly define what is considered disabled.

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    Is Survivorship Universal Life Insurance Right For My Family

    You’ve worked hard to take care of your family and build your estate. You plan to pass your money down to your loved ones or your favorite charity and make a difference in their lives. If you need an affordable option to help protect and grow your legacy after you and your partner pass away, survivorship universal life insurance might be an option for you. The benefits include charitable giving, providing for the ongoing needs for an individual with a disability, business transition planning and the possibility to help pay federal estate taxes and other estate-settlement costs owed after both spouses pass away.

    Second To Die Life Insurance Estate Planning

    The Basics of Survivorship Life Insurance

    Our clients assets usually grow more rapidly than the amount of the federal estate tax exemption, which creates a tax liability for their heirs. Most estates gain interest on their assets, and an average propertys value typically increases annually by 7-10%.

    Its also important to note that without congressional intervention, the federal estate exemption is set to decrease to about $6 million per individual in 2026. Currently, the federal exemption is at an all-time high of more than $12 million.

    Because of the tremendous growth potential for estates valued at $3,000,000 or more, and the uncertainty surrounding future exemptions, most financial planners recommend estate planning to help offset future tax liabilities. The younger you are, the more that your estate will likely grow.

    We often work with clients in their 60s who understand that their heirs could be facing huge inheritance and estate taxes. Adjusting for inflation alone, most estates will roughly double in size after 20 years. Luckily, we have affordable life insurance options with lifetime coverage and a locked rated for people up to the age of 80.

    If you are in your early 50s and your estate is currently worth more than $3 million dollars, adjusting for 3% inflation alone, you can expect your estate to be worth $7,281,787.41 in 30 years.

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    How To Get Joint Life Insurance

    The first step in buying any insurance policy is to determine what youre looking for. After youve decided what kind of policy you want, its time to shop around and compare companies. Once youve found the company that offers good joint life insurance quotes on the policy coverage you want, its time to apply. This step can be done in a number of different ways. Generally, you can meet with an agent in person, talk to them over the phone, or apply for a policy online through the insurance companys website.

    Before the application can be fully reviewed, you and your partner will likely need to submit to an insurance medical exam. This helps the company to determine eligibility and premium rates. After this, provided there are no unexpected problems, all thats left for you to do is to receive your policy and make your first payment.


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