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Second-to-Die Life Insurance. Who Needs It?

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By Byron Udell | October 17, 2019

Survivorship or Second-to-Die life insurance is a type of life insurance that covers two individuals (usually a married couple). The policy’s death benefit is only paid after both insured individuals die. While this type of coverage is most used for estate protection, parents of children with special needs can provide funds for living and care should anything happen.

Lower Costs

This type of policy is generally less expensive than purchasing two individual life policies. The premiums are based on the combined life expectancy, and no benefits are paid until the death of both policyholders. One consideration is that the surviving partner or estate will need to continue to pay the premiums on the policy after the death of the first partner.

Children with Special Needs

Children with special needs can present exceptional challenges. The constant worry of the future financial security and care for a child is stressful. Parents can be left feeling frustrated and alone as they search for information, understanding, and desperately needed support.

A second-to-die policy can be used by parents with special needs children to provide funds for care, a home, a nurse etc should both parents pass.

Estate Protection

Since the mid-1980s, Survivorship policies have become popular with wealthy couples as a way to offset estate tax liabilities and other estate-settlement costs that remained unpaid after the death of the second spouse. This type of policy is often held in an irrevocable trust to avoid inclusion in the estate for estate tax calculations. Owning a second to die policy can help prevent children from having to sell off assets, including a family business or real estate in order to pay estate taxes.

Lenient Underwriting

It is easier to qualify for a Survivorship policy, since two people are being insured, instead of just one. Insurers also tend to be more lenient if one spouse is not as healthy as the other, or is otherwise uninsurable. Why? Because the insurance company knows that they will continue to collect premiums until both parties have died.

Advantages of a Survivorship Policy

  • Less expensive than a traditional single-insured policy
  • Protects your estate so your children won’t have to pay estate taxes
  • Allows you to set up and fund a trust for your children or grandchildren
  • More affordable (even if one spouse is not as healthy as the other) than owning two individual policies
  • Can be used to equalize an estate when one or more children may be in a family business and others may not be
  • May be used to create or augment your estate
  • Builds tax-deferred cash value that can be accessed for a variety of personal needs

To learn more about Survivorship life insurance or have general life insurance questions call a real person at 800-442-9899.  You have enough things to think about, so we’ve taken the stress out of shopping for life insurance.

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