Survivorship life insurance, also known as second-to-die life insurance policy is an interesting tool, where the death benefits are available only at the death of the second insured policy holder. In other words, this insurance is usually for a couple and allows for death benefits that offer protection in the case of death of both of them.
The joint survivorship life insurance is usually taken by a married couple to pass off hefty benefits of property to their heirs without tax burden. This policy is taken usually to pay off the federal estate taxes and therefore preserve the estate for the heirs. For example, when a husband dies, the estate is passed on to the spouse with marital tax deductions. The unlimited amount of those assets are taxed when the spouse dies too, which is when federal taxes are levied on the assets. But the survivorship life insurance provides death benefits at that point thereby paying off the federal taxes on the assets, leaving the estate unharmed in value, to the heirs.
There are several benefits offered by this policy. Firstly, it is very simple as it doesn’t involve excessive planning in case of couples regarding individual life insurance policies. It is ideal when there are no concerns around income as long as a single spouse is alive. Therefore the death benefits are available only when the second insured person dies as well.
This policy is ideal for couples who want to leave significant funds to take care of their children who demand special attention. This could also apply for dependents not expected to have their financial income e.g. dependent parents. Most importantly it is a smart way of paying off the federal taxes that will be levied eventually, bit by bit, while enjoying tax benefits with the insurance policy.
One of the biggest benefits of this policy is that it insures a couple as opposed to a single individual. The flexible death benefits and premiums ensure that liabilities of a couple are taken care of easily. This also saves money on premiums as this policy is far cheaper compared to separate life insurance policies. This is obvious because two individual life insurance policies would always cost more than a joint survivorship life insurance.
The policy is also a great way of securing an insurance cover if one of the spouses suffers from ill health and cannot get an insurance policy on his or her own. In such cases, it is easy to get a survivorship life insurance with flexible benefits. In other words, it is easier to get this policy as opposed to normal policies if a customer is considered risky by traditional insurance conventions.
This policy has a cash value component too that grows over a period of time with accruing interests. In fact, a variable component can be introduced too, where individuals can allocate part of the premium to money market funds, to make the most of higher expected returns from the market.