Survivor, Survivorship or Second To Die Life Insurance Overview

Second to Die, more commonly called Survivorship or Survivor Insurance, is a joint life insurance policy that covers two or more people and pays the benefit when the last insured dies. It is sometimes used by married couples when they want to leave a large portion of their estate to their heirs in a tax free instrument. It offers the advantage of insuring two people at a lower premium than insuring them individually, and may be easier to get if one of the insureds has health problems. A disadvantage, however, is that the premium will be an average of the insureds' ages, which may result in a higher premium than the younger of the insureds would pay.
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Survivor insurance can be term, universal, or whole life. If it's purpose is to protect an estate, you would want it to be whole life. Sometimes, however, survivor insurance is used to protect business partners. When the last partner dies, there may be estate taxes or expenses related to establishing new management or even selling the business. Survivor insurance on business partners could be purchased to pay the debts of the business if the partners die and leave the business with outstanding loans. In this case, a term policy might be purchased under the assumption that at the end of the term, the debts will be paid and the insurance will no longer be needed.

If at all possible, survivor insurance should be whole life or a universal. This way, if the insurance is no longer needed, and the partners are still living, the policy can be cashed in and the funds used for another purpose. Term has no cash value.

Points to consider

How much insurance is actually needed?
Who will be the beneficiary?
Are the insured joint owners or is one person named as the owner?
Can the insured survivor make changes to the policy once the first insured dies?
How rigid is the health underwriting?
How early can an insured cash in the policy without penalty?
Will the policy be level premium and level face value?
Will you have a personal agent who will explain and monitor your policy?

Survivor policies are not particularly common. For one thing, they can be difficult to change after one of the insureds dies. Furthermore, most agencies prefer to keep each insured adult on a separate policy. In cases where it makes sense to have spouses on the same policy—such as a spouse, it is much simpler to do so with a rider. Generally, if there is a spouse rider, it can be converted to some sort of individual life during the life of the master policy.

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