Survivorship Life Insurance

When planning for your future, life insurance coverage could play an integral part. This is because life insurance proceeds can be used for a variety of different needs, such as the payoff of debt, and/or the ongoing payment of regular living expenses. Life insurance is also oftentimes a key tool in the estate planning process.…
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When planning for your future, life insurance coverage could play an integral part. This is because life insurance proceeds can be used for a variety of different needs, such as the payoff of debt, and/or the ongoing payment of regular living expenses.

Life insurance is also oftentimes a key tool in the estate planning process. This is because it can help to lessen the tax burden that a family might face, and it can also make the transition of various assets much smoother. One type of policy that is particularly beneficial here is survivorship life.

What is Survivorship Life Insurance?

Survivorship life insurance policies insure two lives, as versus just one. Frequently – but not always – these two lives are a husband and a wife. Because both individuals are covered under just one policy, the premium for a survivorship life insurance policy can often be less than that of two separate plans.

Unlike regular, “traditional” life insurance coverage, a survivorship life insurance policy – which can also be referred to as joint survivor life, or second to die life insurance – will not pay out its death benefit until the passing of the second insured. This differs from regular life insurance in that the surviving partner won’t receive any benefits (at least from the survivorship life insurance policy) when his or her spouse dies. Therefore, if there will be a need for the surviving spouse to have liquidity, then it is important to have other coverage in place.

When parents purchase a survivorship life insurance policy, they are typically thinking about their children and/or other heirs (as versus themselves). For instance, the proceeds from this type of policy could be used for paying estate taxes – which could eliminate the need to sell assets and/or to drain savings in order to come up with the needed amount. (However, for the proceeds of the survivorship life insurance policy to not be included in the insured’s estate, the policy will need to be owed in an irrevocable life insurance trust, or ILIT).

It is important to note that, while a survivorship life insurance policy can be an effective tool for estate planning, having this type of coverage may still not eliminate the need for other life insurance coverage.

How Survivorship Life Insurance Works

Similar to regular, single-life coverage, life insurance policies, a survivorship policy can have either a level or an increasing amount of death benefit. Likewise, also similar to regular coverage, the death benefit proceeds that are received by the beneficiary (or beneficiaries) is income tax-free.

There are some nice benefits to purchasing a survivorship life insurance policy. For instance, these policies will often have more favorable underwriting than that of a single policy. Here, because a survivorship life insurance plan is based on two lives as versus just one, underwriters may be more lenient. In fact, in some situations, even if one of the applicants for coverage is uninsurable – but the other is in good health – the policy may still be approved.

This type of policy can also be used to help with equalizing an inheritance among the insureds’ children. In this case, for example, if one child receives ownership in a family business upon the death of the parents, another child (or children) could instead receive proceeds from a survivorship life insurance policy.

There are other uses for such proceeds, too, such as replacing wealth that is spent during the insureds’ lifetimes (such as payment for long-term care costs), and/or funding charitable contributions.

Types of Survivorship Life Insurance Available

There are many different ways in which a survivorship life insurance policy can be structured. These can include as a whole life policy or a universal life policy. With whole life, there is a level death benefit, as well as a cash value component where the funds are allowed to grow on a tax-deferred basis. The return that is generated in the cash value is based on an interest rate that is set by the offering insurance company.

If the policy is universal life, there may be more flexibility in that the insureds may be able to decide how much of the premium payment goes towards the death benefit, and how much goes towards the policy’s cash value (within certain guidelines).

There are also various options for how the premium is paid with a survivorship life insurance policy. For example, in some cases, the premium may be paid monthly or annually. In other cases, the policy may be paid with just one, single lump sum premium payment.

There may also be various riders that can be added to a survivorship life insurance policy. These may include one or some of the following:

  • Disability Waiver of Premium Rider
  • Accelerated Death Benefit Rider
  • Long-Term Care Rider
  • Policy Split Option Rider (which allows the policy owner to “split” the policy death benefit into two separate individual insurance policies if certain triggering events occur, such as divorce)
  • Estate Protection Rider (which provides additional term life insurance if an irrevocable life insurance trust has not been set up prior to the survivorship life insurance policy being issued, and both of he insureds pass away within the first four years of purchasing the policy).

Depending on the rider, as well as on the insurance company that is offering the policy, some of these can be added at no additional cost, while others will cost more in premium.

How Much Does Survivorship Life Insurance Coverage Cost

The amount of premium that is charged on a survivorship life insurance policy can depend on several key factors. These include the age and gender of the insureds, as well as the type and the amount of the life insurance coverage.

The premium can also differ – sometimes substantially – from one insurance company to another, even for the same type and amount of survivorship life insurance coverage. For this reason, it is important to ensure that you shop policies from several different life insurance carriers prior to purchasing a survivorship life insurance plan.

Is Survivorship Life Insurance the Right Type of Coverage for You?

Although it is not right for everyone, there are some instances where a survivorship life insurance policy would be a viable option. For example, estate planners frequently use this type of coverage in order to help lessen the estate tax burden of wealthy couples.

Because the unlimited marital deduction allows assets to pass tax-free from one spouse to another, the real issue oftentimes comes at the death of the second spouse. In this case, a survivorship life insurance policy can essentially delay the benefit payout until the cash is needed for such taxes.

These policies can also be an option for business partners and/or couples who are concerned about providing for a special needs child or other related obligation. Here, too, the benefit is that these policies will pay out funds for estate tax obligations so that the family’s other assets don’t have to be sold and/or savings drained.

How to Get the Best Premium Rates on Survivorship Life Insurance Protection

If you have been seeking the best premium rates on survivorship life insurance protection, then it is recommended that you work in conjunction with an independent life insurance brokerage or agency. In doing so, you will be able to view several different policies, carriers, and premium quotes – and from there, you can determine which will be the best for you and for your budget.

When you are ready to move forward, we can help. We are an independent insurance brokerage, and we work with many of the top life insurance companies in the marketplace today. We can provide you with all of the key details that you need for making a well-informed buying decision about survivorship life insurance – and we can do so for you very quickly, easily, and conveniently, all from your computer, and without you having to meet in person with a life insurance agent. With that in mind, if you are prepared to start the process, then all you have to do is just simply take a minute to fill out the quote form on this page.

Should you find that you still have any additional questions or concerns regarding life insurance coverage, please feel free to reach out to us and speak with one of our experts. We can assist you with any of the details you are looking for.

We understand that the purchase of life insurance can be somewhat overwhelming. This is especially the case when you are working with more complicated life insurance strategies like survivorship life. But the good news is that you can feel much more comfortable with your decision to buy when you are working with an ally on your side. So, contact us today – we’re here to help.


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About Ryan Guina

Ryan Guina is The Military Wallet's founder. He is a writer, small business owner, and entrepreneur. He served over six years on active duty in the USAF and is a current member of the Illinois Air National Guard.

Ryan started The Military Wallet in 2007 after separating from active duty military service and has been writing about financial, small business, and military benefits topics since then. He also writes about personal finance and investing at Cash Money Life.

Ryan uses Personal Capital to track and manage his finances. Personal Capital is a free software program that allows him to track his net worth, balance his investment portfolio, track his income and expenses, and much more. You can open a free Personal Capital account here.

Featured In: Ryan's writing has been featured in the following publications: Forbes, Military.com, US News & World Report, Yahoo Finance, Reserve & National Guard Magazine (print and online editions), Military Influencer Magazine, Cash Money Life, The Military Guide, USAA, Go Banking Rates, and many other publications.

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