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Second To Die Insurance – What Is It?

The second to die or survivorship insurance policy is type of life insurance where two people are insured. For example, a husband and wife.

Both the husband and wife must be deceased before the policy proceeds are paid out.

Sometimes, this kind of insurance coverage can also be applicable to more than two people.

The policy proceeds are used to provide liquidity to an estate especially where estate taxes are projected to be substantial.

Who Benefits from a Survivorship Insurance Policy?                            

If you have a high valued estate inheritance for your heirs, you should be aware they’ll be possible hit with a 55% estate tax after your passing. Second to die insurance will be particularly beneficial for you and your heirs.

This kind of insurance coverage helps your beneficiaries especially if they’re required to pay estate taxes. Additionally, it reduces the tax amount your recipients will be required to pay.

Estate taxes is a complex concept for most of us. To help simplify things the IRS (is that an oxymoron simplify and IRS) has set an exclusion limit for the tax.

The current exclusion limit is slightly above $5 million. If the estate is within the exclusion limit, the beneficiaries will not have to pay the estate tax.

The exclusion limit is like the event horizon because any estate with a net worth over the exclusion limit can attract over 55% property tax. Since 2000, the percentage is on the steady  rise.

Today if the net value of your taxable estate is below $5 million, your heirs will not have to pay the property tax.

Also, people who want to pass on their property to charity would also benefit from second to die policies. Some people, who want to build substantial wealth even opt for this policy because permanent insurance policies are low risk and high reward consequently making survivorship life insurance quite lucrative for any finance-savvy person.

Should you opt for Survivorship Life Insurance?

Well, aside from the fact you’ll be increasing your estate’s value by contributing to your estate coffers. There a few more reasons you should get a survivorship life insurance.

Less Expensive

Have you ever had individual insurance policies for all the members of your family? Then you must know how costly it can be to get coverage for two individuals with single insurance policies.

A survivorship insurance policy is much cheaper than that since a couple can be insured for just a fraction of the cost. The insurance company only has to pay if both insured individuals die. The probability of this occurring within the policy’s term is unlikely.

The premium is less expensive. Your heirs can also split the insurance cost.

It’s Easier to Buy

Since two lives are involved instead of one, the risk for the insurer is reduced. The stress of underwriting process is negligble with your ensurer focusing on the younger between you and your wife.

There also is a silver lining – if you or your wife has a medical history or is too old for buying an insurance policy, he/she can still qualify for a second to die policy.

Remember, the cost of insuring a couple can be a lot less than the price for a single healthy individual under a separate insurance policy. Not only is it a money-saver, but it can also cover the un-insurable with about 40% less cost.

Increases Estate Security

When you have a large estate, the taxes and maintenance cost can slap your heirs hard. It can destabilize the estate and diminish the value in the process.

If you have a high net worth, you may have tangible property, business interest, investment and more, that are directly taxable according to the Federal Government.

Having survivorship insurance helps since the life insurance company since they can pay the death benefit to the trustee (if there is one). It ensures the death benefit is not considered taxable and a part of the inheritance.

A survivorship life insurance helps families bypass the complex and changing estate tax laws that can reduce the estate’s net worth.

Equality in Inheritance

It’s more of a covert benefit of the survivorship life insurance. When the insured want to leave equal parts of their estate to their beneficiaries, they can easily seek help from their Survivor insurance policy to make that happen.

The insured can give specific portions of their estate It helps the insured parties to give specific parts of their property and inheritance to each child based on their interests and qualities so that each portion has the same net worth. 

Survivorship life insurance is more than just another life insurance policy. It’s a smart way to

  • Reduce the impact of estate taxes,
  • Pass equal portions of your estate to heirs, and
  • Maintain your estate value while saving significant amounts of money.

About The Author

Bill Williams has worked as a sales manager in the home décor industry for 13 years. He has written numerous articles and blog posts on topics related to bedroom furniture, including reviews for mattresses such as the Avocado Mattress.

 

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