Survivorship Life Insurance

Survivorship life Insurance, which is sometimes called second to die life insurance or joint survivorship life insurance, is a type of insurance policy that insures the lives of more than one person. Typically used by a husband and wife, survivorship life insurance offers a death benefit, but this benefit is not paid to the policy`s beneficiaries until after the death of the second person who is insured under the terms of the policy.

Survivorship life insurance is appropriate in a situation where the surviving spouse has plenty of money with which to pay bills, but there is a greater need for funds once both parties have passed on. Examples of this type of circumstance include providing for a child with special needs, providing for a large charitable gift, or paying off an estate tax bill. With this type of life insurance policy, estate taxes for a married couple can be delayed until both people have passed on.

Developed in the 1980s as a response to legislation that changed the way in which estates were taxed, survivorship life insurance is almost always less expensive than traditional life insurance policies for a single person. Since the premium cost for a survivorship life insurance policy is based on the joint life expectancy of two people, the insurance company carries a lower risk and passes the savings along to the policyholders in the form of lower premium rates.

The structure of a survivorship life insurance policy is often similar to a whole life or variable universal life insurance policy. This allows a portion of the premium to be invested in a separate account that can potentially increase in value as the financial markets perform well.

Before you purchase a survivorship life insurance policy, there are some important questions which you should ask. Find out how divorce proceedings would affect your policy, and also investigate any proposed changes to federal estate tax laws. In a situation involving divorce, some companies offer a rider that would permit you to divide the survivorship life insurance policy into two separate single-insured policies.

Another consideration in your decision to purchase survivorship life insurance is the anticipated size of your estate. For a couple with a small estate, the cost of the premiums for a survivorship life insurance policy may not make sense in comparison with the potential savings in estate taxes.