Make Estate Planning Easier With a Survivorship Policy
A survivorship life insurance policy, also known and referred to as a “second-to-die policy,” can have significant benefits when it comes to estate planning. While most life insurance policies cover a single person, survivorship policies cover two, usually married couples or domestic partners. These policies aren’t for everyone, but they do have special benefits that make them an attractive option for future planning including preserving assets, covering settlement fees and paying federal estate taxes. Let’s explore these policies in a little more detail.
When Are Survivorship Policies Paid Out?
Survivorship life insurance policies are paid out after the death of both policyholders, not just one as in the more common type of death benefit. Beneficiaries receive the payout after the second policyholder passes, whether it’s immediately after the first policyholder or several years later, providing that premiums are paid up to date.
Why Do People Buy Survivorship Life Insurance Policies?
The main reason to buy these types of policies is to safeguard assets. They’re often used as a financial planning tool to help field the costs of state, federal and estate taxes, so beneficiaries don’t have to bear the expense out of pocket.
However, there are also a number of other reasons why some opt to purchase them. For one, they are sometimes cheaper than the most common types of life insurance policy as the cost of one survivorship policy is often less than the cost of two individual premiums.
Additionally, they can be easier to purchase. If one partner has been declined for an individual life insurance plan because of health or other concerns, the survivorship plan often covers them as insurance companies are often more relaxed with these types of policies.
What Types of Survivorship Life Insurance Policies Are Available?
While individual plans come with term life and permanent life options, most survivorship policies are permanent life. It may be possible to find a term life version, but they are rare.
There are three different types of policies to choose from: whole life, variable life and universal life. All three build up a cash value, but the amount differs between each. For example, whole life has a definitive amount of cash value that’s spelled out in the policy details. Variable life has a cash value that may appreciate or depreciate depending on the investments that the insurance company makes. Universal life gives the policyholder more flexibility in changing the death benefit amount, which in turn changes the premium.
In considering a survivorship life insurance policy, be sure to speak with a qualified financial expert and an attorney to explore individualized options.
~Here’s to Your Financial Health!
A special thanks to Financialhealth.net for providing this article to our readers.