Who Does Survivorship Life Insurance Benefit?

About 54 percent of Americans hold some form of life insurance. Later in life, weighing different life insurance policies is an important consideration for married couples. As you undergo your estate planning process, it’s vital to consider a life insurance policy that will suit your unique circumstances.

How Does Life Insurance Work?

Life insurance ensures payment to beneficiaries should the insured individual pass away. Married couples have the option to either choose a separate insurance policy, which covers each spouse individually, or a joint insurance policy, which insures both parties.

Of the joint insurance policies, there are two types: first-to-die insurance and survivorship life insurance.

What Is Survivorship Life Insurance?

Survivorship life insurance, also called second-to-die life insurance, requires the death of both spouses
in order to pay out the death benefit.

Typically, these are permanent life insurance policies, meaning that the policy remains in effect as long
as the premium is paid. When the first spouse passes away, the other continues to pay the premium. When the second spouse passes away, the death benefit is paid to the designated beneficiaries, typically their children.

Advantages

Survivorship life insurance is a very unique type of life insurance policy, and it holds some unique
advantages.

• Preserves wealth for one’s estate & dependents
• Is affordable (compared with separate, individual policies)

Situations When Survivorship Life Insurance Might Make Sense:

This type of life insurance isn’t right for everyone; instead it’s best suited for very specific scenarios.

Scenario #1: Special Needs Child

If you have a special-needs child and you and your spouse are concerned about the well-being of that
child once you both pass, survivorship life insurance might be a good choice.

In this case, the funds from the policy can be used to guarantee the care of your child if/when both
parents die.

Scenario #2: You’re Planning Your Estate

This life insurance policy is specifically designed to maximize the value of your estate. If you, likely in accordance with a financial advisor, want to leave assets behind for your heirs and help them avoid taxes, survivorship life insurance may be a good choice.

The point of the first-to-die joint policy is to pay out the death benefit to the surviving spouse, aiding them financially. However, if you have a comprehensive financial plan and/or sufficient assets to provide for yourself even after your spouse passes away, you may want to consider survivorship life insurance. This is especially true if you have any children that are financially dependent on you.

Note that when the first spouse passes away, the surviving spouse may be able to access cash value accumulated by the insurance policy—so they won’t be left entirely empty handed.

As you consider various life insurance policies, keep in mind the unique nuances of each policy. In
general, couples in good health that are not planning an estate may want to look at different types of
policies. The life insurance policy you choose should fit within your marriage, your finances and the specific circumstances of your family.

1. https:/ www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4099/registered-pension-plan-guide.html#_Toc457465001

Information presented on this site is for informational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any product or security. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed here. The information being provided is strictly as a courtesy. When you link to any of the web sites provided here, you are leaving this web site. We make no representation as to the completeness or accuracy of information provided at these web sites. Photo courtesy of TheStandingDesk.