What Is a Second-to-Die Life Insurance Policy?

A second-to-die life insurance policy, also known as survivorship life insurance, is a specialized type of coverage designed to provide financial protection for two individuals, typically married couples. Unlike traditional life insurance policies that pay out upon the death of a single insured person, a second-to-die policy disburses the death benefit only after both insured parties have passed away. Understanding the details of this policy enables couples to make well-informed choices regarding their long-term financial strategies.

Second-to-Die Life Insurance Explained

One of the primary purposes of a second-to-die life insurance policy is estate planning. It can help beneficiaries, often children or grandchildren, cover estate taxes and other settlement costs without liquidating inherited assets. This can be particularly beneficial for families with significant assets, such as a family business or vacation home, that they wish to pass on intact.

The premiums for second-to-die policies are generally lower than those for two separate individual policies. This is because the insurance company typically bases the premiums on the joint life expectancy of both insured individuals, typically resulting in a longer period before the death benefit is paid out. Additionally, the underwriting process for these policies can be less stringent, making it easier for couples with health issues to obtain coverage.

However, there are some drawbacks to consider. Since the death benefit is paid only after both individuals have died, the surviving spouse does not receive any financial support from the policy upon the first death. This can be a disadvantage if the surviving spouse needs funds for living expenses or medical bills. Furthermore, once the policy is in place, it can be challenging to cancel or alter without losing the benefits already accrued.

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For life insurance near you, contact United Benefit Solutions, LLC.

This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.