Should you buy a Second to Die Life insurance Policy?

Commonly referred to as last to die insurance, joint insurance or survivorship insurance, second-to-die life insurance is a form of insurance policy is an affordable and interesting option that you may want to consider for estate planning purposes.

A second-to-die life insurance policy is a set up that covers two individuals and only pays out the policy proceeds until the surviving spouse dies. In most every case, it is a husband and wife that are insured and is purchased solely for estate planning reasons. Because they cover two lives and only pay out at the second death, survivorship policies’ in general are less expensive compared to individual life insurance policies and are great for providing liquidity to illiquid estates.

Term Life Insurance vs. Second to Die Insurance: What’s the Difference?

With a universal or whole life or a regular term life insurance, the beneficiaries of a person are paid a death benefit after their demise. While these policies only insure a single person, second to die insurance insures two people at once. This means that if the policy is purchased by you and your spouse, the death benefit will be paid to after your death to your beneficiaries which can be your heirs, a trust or a charity that you set up. Second-to-die insurance policies work similar to other life insurance policies, the only difference is that the death benefit is not paid out until the second death.

How Does a Second to Die Insurance Policy Work?

The application process for a second-to-die insurance policy is exactly like buying individual life insurance with the only exception that it covers two people (usually a husband and wife). Once the application form is completed and signed (by you and your spouse), you may be required to submit actual medical records from your physician in order to complete the underwriting process. Once the medical information is reviewed, your policy is approved and issued.

Is Second to Die Insurance Policy a Worthwhile Investment?

People choose the policies they do for different reasons. Because they’re designed for the long term, second to die insurance policies are mostly purchased by individuals having a high net worth to pass wealth and to keep their estate whole.
People choose the policies they do for a number of different reasons. Second to die insurance policies are generally used for giving to charities, planning an estate, and ensuring there is money to provide for a child with special needs. A second to die insurance trust is another reason survivorship policies can be set up.

Pros and Cons

There are a number of advantages of buying a joint life insurance policy. Some of the most important are listed below.

Affordable – Since they cover two individuals, and the policy doesn’t pay until the death of the second individual (likely a longer life expectancy), second life policies are cheaper compared to individual life policies.

Provide Liquidity – If you have substantial real estate holdings or a large percentage of your net worth is made up of non-liquid assets, second-to-die insurance can easily offer liquid cash. This protects your illiquid property and insures that you don’t have to ‘quick sell’ your real estate or other assets to pay off your estate taxes.

In simple words, second to die life insurance policy is often a cost effective way of providing an estate with liquid assets so that you do not have to sell out your illiquid assets at an inappropriate time.

Even though second-to-die insurance policies are often very useful estate planning vehicles, one disadvantage of this type of policy is that premiums may still be due after the death of the first insured individual.

This is the reason why in the typical husband and wife situation, it is important that the surviving spouse be able to keep paying the premium because no proceeds are paid until after the second individual is deceased. One way of alleviating this issue is to consider a customized premium payment structure that enables the policy to be fully funded within a defined time period.

However, a second-to-die insurance policy won’t be the best fit for everyone. Talk to one of our licensed insurance agent for more information on second-to-die insurance.

When getting a second to die life insurance quote.

Just like getting any life insurance quote, you would want to get advice from an agency or agent that can help you select the best policy according to your unique needs. If you’re a high net worth individual and are expecting to pay estate taxes, second-to-die life insurance would be your best bet. Compared to finding rates on a traditional policy, finding second-to-die insurance rates is a little more complex. But we can help you with every step form gathering quotes to submitting in an application.

Our experts can help you find rates for a second-to-die policy and help you pick the most affordable option for you. Call us today to get a second to die insurance quote. We’ll email you the quote.
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