What Is A Survivorship Life Insurance Policy?
Life insurance helps to provide much needed financial protection to many people and families. It can be a very important estate planning tool. Notably, life insurance policies come in a wide range of different forms. For some people—often married couples who want to provide for their children—a survivorship life insurance policy—can be especially effective. Here, our Boston estate planning lawyer explains the key things to know about survivorship life insurance policies.
Understanding Survivorship Life Insurance Policies
MassMutual defines a survivorship life insurance policy simply as “life insurance that covers two policyowners and pays off at the second death.” In some cases, you will hear it referred to as a “second to die” life insurance policy. It covers two people—often a married couple. In contrast to individual life insurance policies, survivorship life insurance death benefits are only paid out after both insured parties pass away. These policies are often used as an estate planning tool.
Know the Advantages of a Survivorship Life Insurance Policy
Are you considering using a survivorship life insurance policy as part of your estate plan? It may or may not be the right option. Here are some notable advantages of survivorship life insurance:
- Estate Tax Protection: A survivorship life insurance policy can help cover estate taxes. It ensures that your beneficiaries receive the full value of your estate without any tax obligations or any related legal costs. The death benefit provides immediate liquidity when it is needed most. It could allow heirs to avoid selling valuable assets, like a family home.
- Legacy Planning for Heirs: These policies can be used to create a lasting financial legacy for your children, grandchildren, or even a preferred charity. The payout provides a significant resource for future generations or supports causes that matter to you. It is a strategic way to pass down wealth or contribute to philanthropic goals.
- Easier to Qualify for Coverage: Another benefit of Survivorship life insurance is often easier to obtain compared to individual policies—particularly if one insured has health issues that could make it difficult to get coverage on their own. The underwriting process considers the combined health of both individuals, increasing the likelihood of approval.
- Cost-Effective: A final significant benefit is that survivorship life insurance typically costs less than purchasing two individual policies. By covering both individuals under a single policy, premiums are reduced.
To be clear, this coverage is not the right option for every situation. There are certainly some drawbacks—with the most notable being that no death benefit is paid after the death of the first of the two policyholders. An estate planning attorney can help you evaluate this option:
Get Help From Our Boston Estate Planning Attorney Today
At Fisher Law LLC, our Massachusetts estate planning lawyer is compassionate, experienced, and committed to helping clients find the best answer. Do you have questions about survivorship life insurance policies? We are here to help. Contact us today to arrange a confidential case review. We provide solutions-forward estate planning services to families throughout the Greater Boston area.
Source:
blog.massmutual.com/insurance/survivorship-insurance-estate-planning
