Should You Get Permanent Life Insurance?

What is the Type of Surviving Life Insurance Policy?

The variable universal life insurance, also known as survivorship life insurance, is a type of joint insurance policy that covers two people. Survivorship life insurance is often used by couples. The survivorship life insurance only pays the death benefit to the beneficiary upon the death of all policyholders or insured individuals in the policy. It will not pay the death benefit if only one of the insured individuals passes away.

Joint Insurance vs. Survivorship Life Insurance: What’s the Difference?

Joint insurance is when an insurance policy covers multiple individuals under one policy. There are two options for joint life insurance: the first is first-to-die and the second is survivorship. The standard option for joint life insurance is often a “first-to-die” policy. In a joint insurance policy “first-to-die,” if one of the insured spouses dies, the death benefit is paid to the surviving spouse as the beneficiary. The aim is to leave money for the spouse to help with living expenses and replace the lost income from the deceased partner’s death.

Survivorship life insurance works differently. It is a joint insurance policy that covers both individuals but will only pay out when both insured individuals have passed away. This is why it may be referred to as “second-to-die.”

The strategy in a survivorship life insurance policy is to leave money for the couple’s heirs, as opposed to the joint insurance “first-to-die” policy that leaves the death benefit to the spouse.

Advantages of a Survivorship Life Insurance Policy

There are some key advantages of a survivorship life insurance policy:

• Preserving wealth as part of an estate plan
• Creating wealth for heirs
• Obtaining insurance when one spouse is hard to insure
• Accessing cash values when one spouse passes away, while retaining the death benefits for the heirs
• Cost savings

Some people choose to purchase a survivorship life insurance policy after consulting with an estate planning attorney to preserve their wealth.

Others may opt to buy this type of policy to build wealth for their heirs. In cases where people believe they will use their assets and do not have significant property to leave for heirs, this can be a good option to leave a benefit for heirs. A good financial planner can help you make these decisions.

Survivorship life insurance policies often have one advantage that is not available in other life insurance policies: if one of the spouses is having trouble obtaining life insurance, they may be able to get insured in a joint survivorship life insurance policy at a lower cost.

Another benefit of a survivorship life insurance policy, in addition to leaving money for heirs after the death of both spouses, is that when one spouse dies, if there is cash value built into the survivorship life insurance policy, the surviving spouse may be able to access the cash value of the policy as needed.

Finally, the cost can be a good reason to consider a joint life insurance policy. A survivorship life insurance policy can save money instead of having two separate life insurance policies. Especially in cases where one of the spouses has health issues or may have difficulty finding affordable life insurance.

How Does Survivorship Life Insurance Affect Your Estate Planning?

An important aspect of estate planning with a survivorship life insurance policy is that the benefit is not paid to the spouse but to the heirs. There are tax implications in this scenario. Many people use parts of the life insurance death benefit to pay federal estate taxes and other estate settlement costs.

Life insurance is considered a good way to leave money for heirs not only because of the cash death value but also due to the tax advantages.

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You have a trained estate planning attorney and financial planner to help you provide guidance on the best ways to manage your estate and do estate planning with you since each case is different and you want to find the most suitable plan for you.

Things to Consider When Buying Survivorship Life Insurance

When purchasing a survivorship life insurance policy, be sure to discuss these options with your financial planner:

• If you want a whole life policy versus a universal variable life policy. These two policies have different investment/savings options that can affect cash values.
• Find out if your policy has an option to split the policy into two separate policies if necessary. Your life circumstances may change, and a good insurance policy will have the ability to change with you. Some insurance policies have a rider that allows you to split the policy under certain circumstances, for example, in the case of divorce.

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Source: https://www.thebalancemoney.com/should-you-get-survivorship-life-insurance-4156916