Second to die life insurance is also known as survivorship life insurance and it provides protection for two people, husband and wife, spouses, or business partners, for a lower cost than two separate policies.
Second to die coverage is usually chosen by business partners or affluent married couples where the death benefit is not financially necessary on the death of the first partner or individual. Second to die policies only pay the death benefit upon the death of the second insured person or policyholder.
Why Buy Life Insurance?
Second to die life insurance is most often used in estate planning. Survivorship coverage can be used as a tool to provide a trust for the care of a special needs child after both parents have died, to pay for education or college for children under the age of 18, leave a significant gift to a favorite charity, or to pay estate tax and income taxes for heirs of affluent couples.
Since death benefits are not taxable, a second to die policy will keep the bulk of the estate intact for heirs. It is also cheaper than insuring two spouses with separate contracts, while providing for the needs of surviving heirs.
If A Spouse Cannot Qualify For Life Insurance
If one spouse cannot qualify for life insurance, second to die coverage may be an option. Since two people are insured on this type of policy and the company makes no payments until the second person dies, this type of protection may be easier to qualify for.
A second to die life insurance policy is only practical if the surviving spouse will have adequate funds to live on when the first spouse dies, since payment is only made on the death of the second spouse. If the second spouse will need the death benefit proceeds upon the death of the first, buying separate life insurance is better.
Protecting Family-Owned Businesses
Businesses with sizable assets need protection from estate and income taxes when the owners die. A spouse can transfer business interests to the surviving spouse on his or her death without any tax liability, but when the second spouse dies, the taxes due fall to heirs and can decimate the assets of the business.
A second to die policy can be used to cover estate and income taxes and preserve the business for surviving family members or beneficiaries. Protecting a family owned business is one of the most common uses for this policy.
Business partnerships are often small concerns, much like family owned businesses. If the partnership is designed to prevent the heirs of either partner from claiming business assets at that person’s death, a survivorship policy may be a good choice.
The business must be able to continue with only one of the partners and the insurance should be sufficient to cover inheritance taxes for heirs. It can work for estate planning for business partners in the same way it works for married couples.
Is Life Insurance A Good Choice?
A good estate planner may be able to mitigate tax liability for heirs and may even advise a couple to buy life insurance.
Some types of protection have a rider that allows the policy to be split in the event of a divorce, but some do not, so it is wise to thoroughly review your contract before buying it. Each company creates and develops its own model, coverage plans, and terms and conditions.
Estate tax laws may change, making the policy unnecessary, but for those who want to ensure that an estate or family owned business remains intact for their heirs, second to die coverage is your best bet.
Compare Quotes and Companies
By comparing life insurance quotes online, potential consumers can see what life insurance companies and policies are available, quickly get rate quotes, and find the best, yet cheapest life insurance available. Individuals simply answer a few questions and the life insurance quotes are provided instantly and free.
Getting the best rates is another way to help preserve an estate, and comparing premiums is the key to getting the lowest prices on any type of life insurance policy you may be interested in.
Second to die life insurance is not the best choice for every couple, but families who want to keep their assets intact for their heirs can benefit from using survivorship in their estate planning. A professional financial advisor can help couples decide if life insurance is the best way to preserve their assets or family owned business.