A Life Insurance Policy to Die For:

More popularly known as “The Second to Die Life Insurance Policy”,  Survivorship Life Insurance jointly insures two persons instead of one.  In most cases the persons are husband and wife. The beneficiary is neither one of the two insurers but a third person who gets the benefits only after the death of both the insurers.
Estate settlement cost and estate taxes are the two biggest driving forces behind the purchase of Survivorship Life Insurance by couples.  The policy allows the postponing of payment of taxes until the death of the surviving spouse and then the insurance takes care of all the taxes.  This means that people who received property from their parents would not need to bother about the estate taxes as it would be taken care of by the Survivorship Life Insurance policy.   The policy is also quite popular among the parents of children with special needs.  This ensures that the amount of funds available from the policy are sufficient to take care of the child after the death of both the parents.  If survivorship life insurance isn’t suited to your needs, perhaps whole life insurance is a better choice.

Advantages of Survivorship Life Insurance:

  • Low Premiums:  Probably the biggest advantage related to Survivorship Life Insurance
  • Easier to Purchase:  Another great advantage related to Survivorship Life Insurance is that it is really easy to purchase even in if one of the policy holders has serious health concerns. This is because the benefits need to be paid only after the death of the second surviving spouse ; thus, the companies are ready to issue the policy even if one of them has a history of health problems.  Insurance companies are not too concerned about the health of one of the insurers.  This is not the case in a normal insurance policy where there is only one insurer.
  • Policy for All:  Survivorship Life Insurance can be a great alternate for those who have been denied a single life insurance policy.
  • Conservation of the Estate:  The policy is used by the wealthy as a great means to conserve the estate. The taxes incurred at the time of death of the surviving spouse may prove too much for the beneficiaries and may force them to sell off the property.  A Survivorship Life Insurance policy can come to the aid in the situation and provide an opportunity to preserve the estate.

Disadvantages of Survivorship Life Insurance:

  • Third Party beneficiary:  The beneficiary in the policy is a third person other than the participating couple. This means the surviving partner would not get any kind of financial support he or she might need in case of death of the spouse.
  • The Estate Law:  A really important thing to note here is that the Survivorship Life Insurance policy follows the rules and regulations under the current tax law.  Any changes in the same might simply mean that the policy is not valid any more.