Survivorship Life Insurance: What You Need To Know

Survivorship life insurance is a type of life insurance which insures two people, typically spouses, under one policy. It pays out a death benefit when both insured individuals have passed away. This type of life insurance can be an excellent way for couples to financially protect their loved ones, their business, or their estate.

How Does It Work?

Survivorship life insurance is sometimes referred to as second-to-die insurance because it only pays out when both people insured on the policy have died. This makes it an attractive option for couples looking to leave a legacy for their heirs or protect their business or estate from estate taxes.

The death benefit can be used for a variety of purposes, including paying estate taxes, funding a buy-sell agreement, or providing financial security for children or other dependents. In most cases, the premium for a survivorship life policy is less expensive than the premium for two individual life insurance policies.

Types of Survivorship Life Insurance

There are two types of survivorship life insurance:

Traditional Survivorship Life Insurance

With traditional survivorship life insurance, the policy pays out the death benefit after both insured individuals have died. The premiums for traditional survivorship life insurance policies are generally the most affordable option, and they offer a guaranteed death benefit.

Variable Survivorship Life Insurance

With variable survivorship life insurance, the policy’s cash value is invested in a variety of different options that the policyholder can choose from. This can lead to higher potential returns, but it also means that the death benefit is not guaranteed.

What Are The Benefits Of Survivorship Life Insurance?

There are many benefits to choosing survivorship life insurance:

Cost Savings:

Survivorship life insurance is generally less expensive than two individual life insurance policies, as the risk to the insurer is spread across two people.

Estate Planning:

Survivorship life insurance can be an effective tool for estate planning. It can help to cover the expenses associated with settling an estate, or provide heirs with a financial legacy.

Business Planning:

For business owners, survivorship life insurance can be used to fund a buy-sell agreement or provide liquidity to the business upon the death of one or both business partners.

Who Should Consider Survivorship Life Insurance?

Survivorship life insurance is an excellent option for married couples who want to leave a financial legacy for their heirs or protect their estate from estate taxes. It can also be a useful tool for business owners who want to provide financial security for their business partners or fund a buy-sell agreement.

What Factors Affect The Cost Of Survivorship Life Insurance?

Several factors can affect the cost of a survivorship life insurance policy:

Age:

The age of the insured individuals will play a significant role in determining the cost of the policy. Generally, the younger the insured individuals are, the less expensive the policy will be.

Health:

The health of the insured individuals will also play a significant role in determining the cost of the policy. Individuals who are in good health will generally pay less for their policy than those who have health issues.

Gender:

Women typically pay less for life insurance than men of the same age and health class.

Lifestyle:

Individuals who engage in risky behaviors, such as smoking or skydiving, will generally pay more for their policy.

FAQ

Is survivorship life insurance the same as joint life insurance?

No, survivorship life insurance is not the same as joint life insurance. With joint life insurance, the policy pays out a death benefit when one of the insured individuals dies. With survivorship life insurance, the policy pays out the death benefit only when both insured individuals have died.

Do I need survivorship life insurance if I already have individual life insurance policies?

It depends on your individual situation. Survivorship life insurance can be an excellent option for couples who want to leave a legacy for their heirs or protect their estate from estate taxes. It can also be useful for business owners who want to provide financial security for their business partners or fund a buy-sell agreement.

Can I convert my survivorship life insurance policy to an individual policy?

It depends on the specific policy. Some policies may allow for a conversion option, while others may not. It’s essential to review the terms of your policy to see whether a conversion option is available.

How much survivorship life insurance do I need?

The amount of survivorship life insurance you need will depend on your individual situation. It’s important to consider all of your financial obligations, such as estate taxes, outstanding debts, and the financial needs of your heirs or business partners.

Conclusion

Survivorship life insurance can be an excellent option for couples who want to financially protect their loved ones, their business, or their estate. It offers cost savings, estate and business planning benefits, and can be customized to meet individual needs. If you’re considering survivorship life insurance, it’s essential to work with a trusted financial professional to determine the right coverage for your unique needs.