How Are Survivorship Life Insurance Policies Helpful?
Survivorship life insurance policies, also known as second-to-die policies, are a type of joint life insurance policy where the benefit is only paid out after the second (surviving) person passes away. While these policies cannot be used for income replacement, they can be useful for estate planning strategies. Guardian offers a first-to-die whole life insurance option called EstateGuard® for joint life insurance coverage.
Benefits of Survivorship Life Insurance Policies
Survivorship life insurance policies can be helpful in various situations such as:
| Situation | Benefit |
|---|---|
| Transferring assets to beneficiaries | Avoids probate and simplifies asset transfer to non-relatives like friends or business associates |
| Creating a trust for a beneficiary with special needs | Provides a death benefit payout to fund a trust |
| Business partners planning for succession | Ensures a death benefit payout for a successful business transition |
| Leaving a legacy for a charitable cause | Death benefit payout can go to a favorite charity or religious organization |
Joint life insurance policies are typically purchased with a permanent whole or universal life policy instead of term life insurance. This is because most couples don’t want temporary protection and want to build cash value which can be drawn on if needed. Additionally, joint life expectancy is typically longer than individual life expectancy, making second-to-die policies more affordable than first-to-die policies.
Choosing the Right Joint Life Insurance Policy
When considering a joint life insurance policy, it’s important to discuss as a couple whether a single death benefit policy is the best option for your needs. Consider looking at other life insurance policies and coverage options like term life insurance. Speak to a financial professional who can answer your questions and guide you to the right type of coverage.
Remember that joint life policies are only designed to cover two individuals, but those individuals do not have to be related. For example, a survivorship policy could cover two business partners.
It’s important to consult with a tax, legal, or accounting professional regarding your individual situation to ensure that your policy aligns with your estate planning goals.
Overall, survivorship life insurance policies can be helpful for estate planning strategies and simplifying asset transfer to beneficiaries.
