Protect Your Estate with Survivorship (aka: Second
to Die) Life Insurance
If you want a life insurance policy that covers both you and a spouse, but is designed primarily to enable your heirs to pay the taxes on a large estate, you may want to seek out “survivorship life,” also known as “Second to Die.” It isn't particularly common, but a few companies do carry it. It allows you to ensure two or more people at a lower premium than purchasing several individual policies and may be an option if one of the intended insureds has health problems that would otherwise result in a rated policy or in an inability to be insured at all.
If the purpose of a Second to Die policy is to protect an estate, you want the policy to be either whole life or universal. However, this type of policy can also be used to protect a business. When the last partner dies, there may still be outstanding debt or even the need to train new management or restructure the business. This can be a costly legal procedure which can be funded with a survivorship life insurance policy. If the intention is to use the policy to pay business loans, a term variation might suffice since it would be assumed that by the end of the term, the loans would also be paid and the insurance would no longer be needed.
Even if a term policy would be suitable, investors should consider using a whole life or universal variation. Then, if the insurance is no longer needed, the policy could be surrendered for its cash value which could be invested in other instruments.
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