Survivorship Life Insurance, or second-to-die life insurance, is a unique policy that simultaneously
insures two individuals, usually spouses. The policy is crafted specifically to serve the needs of
estate planning, as it disburses the death benefit post the demise of the second insured individual.
This strategic timing of the payout is particularly beneficial in managing federal estate taxes and
ensuring that heirs are provided for financially.
Advantages of Survivorship Life Insurance
Notable benefits of this policy include:
Estate Planning Tool: It is optimally suited for estate planning purposes, offering a streamlined
solution for managing federal estate taxes upon the death of both insured parties.
Cost-Effective Premiums: The joint nature of the policy generally results in lower premiums
compared to purchasing two separate individual policies.
Enhanced Insurability: If one of the insured parties has health concerns, this policy may still be
obtainable, as the risk assessment is based on the combined life expectancy.
Disadvantages of Survivorship Life Insurance
There are also several considerations to bear in mind:
Deferred Death Benefit: The policy does not provide immediate financial assistance to the surviving
insured, as the benefit is only paid out after both have passed away.
Complexity in Planning: Estate planning with this type of insurance may require more advanced
strategies and the setup of trusts, adding to the complexity.
Policy Inflexibility: Once the policy is in force, there is generally less room for adjustments, which
could be a limitation for those desiring more adaptability.
