What is survivorship life insurance?
Survivorship Life Insurance is also known as “second to die life insurance”. A survivorship policy insures two individuals, most of the time a husband and wife, under one life insurance policy. The death benefit is paid out to the policies beneficiaries, without a federal income tax, after the death of the second individual.
This types of life insurance is mostly used for the payment of Estate Taxes, there are many more useful purposes for this kind of policy such as trust funding or possibly leaving behind money for surviving children with special needs.
The close association of Survivorship Life Insurance for paying Estate Taxes stems from the fact that the policies were originally designed for that purpose.
Situations and circumstances have arisen with Insurance Industry Clients and Customers that the usefulness of Survivorship Life has expanded so much that it is also now known as ‘Second-to-Die’ Insurance.
In this blog, we’re going to cover the different options you have and the types of life insurance policies that you would need for a second to die policy. Also what life insurance companies offer a second to die life policy, how much they cost and most importantly what not to do when buying one.
The best second to die life insurance companies:
One thing about second to die policies is people usually buy them later in life after they have accumulated enough wealth to be on the hook to pay estate taxes. One of the issues you run into as you age is qualifying for life insurance. As you age you develop more health challenges, which can affect the cost and rate class you are eligible. This is why we like Principal as they have great underwriting options for an individual with health challenges particularly on second to die life insurance policies.
Principal is one of over 40 life insurance companies we represent, but they are a great life insurance company to work with for second to die policies because they are effortless to work with. They also have great underwriting features such as lifestyle credits and an automatic standard approval program which offer a ton of benefits to clients who are impaired risk or may be facing a few health challenges.
When you combine the healthy lifestyle credits along with their automatic standard approval program, it can drive down the premiums by getting impaired risk clients a better rate class. Which can save the consumer thousands of dollars?
Principal also offers a feature for no exam up to $1,000,000 for individual applicants. This can help speed up underwriting and the issuing of the policy.
With survivorship life insurance you’re typically looking for the death benefit to pay your estate tax obligation, and your goal should be to keep the premiums as low as possible.
Types of second to die policiesWhen it comes to buying second to die life insurance, you will need a permanent life insurance policy. You should never try to use a term policy in this situation as you never want to have a chance of outliving the policy. After all, you’re most likely set this policy up to pay for taxes and what would happen if you were to outlive the policy and you had no life insurance money in place to pay the taxes.
You can use two types of permanent options.
- Whole Life Insurance
- Universal Life Insurance
Universal life insurance policy
A survivorship universal life insurance policy is the most cost-effective way to buy a second to die type of life insurance policy. A universal life insurance policy will give you the permanent policy you need with the lowest premium.
A universal life policy can come with a no-lapse guarantee which will make the policy last to age 121 even if the accumulated cash value in the policy runs dry. With a survivorship universal life insurance policy the premiums will remain level throughout the life of the plan. They also offer flexible payments so if you needed to miss a payment it would not lapse the policy, this is a feature the whole life policy does not provide.
A guaranteed universal life insurance policy is what we recommend if you are not worried about cash value and you want affordable permanent protection.
Whole life insurance policy
A survivorship whole life insurance policy is one way to make sure you have the permanent protection you need; however, this is the most expensive way to secure a survivorship type of policy.
One advantage this has over the universal life survivorship policy is it builds up a cash value that will not run dry as you age. So if you needed to you could use some of the cash value that you accumulate which we don’t recommend. With a survivorship whole life insurance policy you also have the options of paid-up additions later in life, so if you can no longer pay the premiums, then you can exercise the paid-up additions rider and have a policy for life and never make another premium payment.
A whole life insurance policy is what we recommend if you are worried about cash value growth and you are willing to pay more for permanent protection.
Term life insurance policy
Term life insurance and survivorship life insurance don’t mix. A term policy is the absolute wrong route to take if you are trying to secure a second to die policy. What happens if you buy a second to die term life insurance policy and you or your spouse outlive the term? There is a good possibility of that happening; this is why we never recommend a term life insurance policy in this situation.
It’s time to get quotes. Did you know a Local Life Agent can shop multiple survivorship life insurance companies? There are only a handful of survivorship life insurance companies who offer second to die plans, and we know exactly which companies offer the best policy and survivorship rates.
That’s why working with us is so beneficial. We can have quote turned around in a day and emailed right to you.
Fill out the form, and we will shop the life insurance companies that offer survivorship life insurance. Work with an agent who will do all the work for you and take the hassle out of getting a quote.