Advantages of Having Survivorship Insurance
Life insurance is an important asset to own as it has a potentially high yield, excellent tax-favored benefits, and can solve many financial issues. Unlike traditional life insurance, survivorship insurance, also known as “second-to-die”, is a type of life insurance that insures two lives-usually a husband and wife. This policy pays the death benefit to the insured’s heirs only after both insureds have passed away. Because it does not pay out until both parties have passed, it is less useful as an income replacement and is best applied towards protecting the financial health of future generations.
Typically, the death benefit from a survivorship insurance policy is meant to pay federal estate taxes, inheritance taxes, and to cover the financial needs of the insured’s children or dependents. Some of the key advantages of a survivorship insurance policy include:
Preserve the Couples Wealth.
Individuals may choose to purchase a survivorship insurance policy after consulting with an estate planning attorney in order to preserve their wealth and assets.
Build Wealth for Heirs.
Some individuals may choose to purchase a survivorship insurance policy to build wealth for their heirs. In circumstances where individuals believe they will have used up their assets and will not have a large estate upon their death, this policy is a good option to leave a legacy for their heirs.
Take Advantage of Cash Value.
When one spouse has died, if there is cash value built up in the survivorship insurance policy, then the surviving spouse may be able to take advantage of the cash value of the policy as needed.
Easier to Purchase.
Survivorship insurance may be easier to qualify for than single insured life insurance. Since both policyholders need to pass away before any benefit is paid out, the insurance company is less concerned about whether one of the spouses is healthy or not. However, it is important to remember that each insurance company will have differing definitions of what is “uninsurable”.
Save on Costs.
A survivorship insurance policy can potentially save an individual money in the long run as opposed to having two separate life insurance policies. Especially when one of the spouses has medical issues or may have trouble finding affordable life insurance.
Things to Consider Before Purchasing
If you’re looking to use life insurance as an estate planning tool and want to ensure your heirs will receive the death benefit when you and your spouse pass away, then a survivorship insurance policy will work to your advantage. However, with any type of insurance policy, it is vital to find out how the policy with be impacted by a change in estate tax laws and in the event of a divorce.
As a full-service insurance provider, Schechner Lifson can help you determine whether or not a survivorship insurance policy is right for your individual circumstances. Contact us today!