Could a Survivorship Life Insurance Policy Be Better for You Than Traditional Life Insurance?

Mike Valles By Mike Valles, 8th Apr 2014 | Follow this author | RSS Feed | Short URL http://nut.bz/1usm2m05/
Posted in Wikinut>Money>Insurance

Traditional life insurance limits your options when it comes to protecting your family's best interests. Survivorship life insurance can provide coverage for two people, and it will also help you to have some estate planning benefits, too.

Introduction

As you look for a good life insurance policy to protect your family financially, you may want to take a good look at a survivorship life insurance policy. This insurance policy can enable you to provide coverage for two people, and it will also enable you to have a tool for estate planning that can help you pass your assets on to your loved ones with fewer problems. It also helps provide money to protect the estate when the primary insured dies.

A Powerful Need for Survivorship Life Insurance

One real need that is met by survivorship life insurance policies is that it enables your heirs to have access to the money needed to pay the estate taxes. What often happens otherwise is that upon death, the estate passes on to the children – and then the estate taxes is due. In a large estate, which would be several million dollars, there may not enough cash available for the heirs to pay the estate taxes. When that happens, the estate, or part of it, must be put up for sale to raise the money needed. This could easily mean that the assets are not going to be divided up as planned, and more money will end up going to taxes than was ever intended.

The primary purpose of a survivorship life insurance policy is to protect the estate so that as much of it as possible can be passed directly to the heirs. This kind of policy helps to ensure that this will actually happen after both covered individuals are dead by giving your heirs the money needed for the taxes.

How a Survivorship Life Insurance Policy Works

A survivorship life insurance policy is designed to cover two people, usually the husband and the wife. This policy is also commonly called a second to die life insurance policy. When the first spouse dies, the other spouse continues to be covered, and tax laws are such that no inheritance taxes need to be paid at that time because most states permit assets to be passed to a spouse without taxes. No insurance benefits are going to be paid until the second spouse dies.

When the second spouse dies, the estate is passed on to the heirs and the estate taxes will be due at that time. This news of potentially heavy taxes can often overshadow the joyous news of receiving an inheritance for your heirs if it is a large amount, because they may not have enough money available to pay them. When this kind of insurance is in place, it provides cash to be available for the taxes, enabling the estate to be retained and distributed as planned to the heirs.

Advantages of a Survivorship Life Insurance Policy

A strong advantage of a survivorship life insurance policy is that life insurance can be obtained at a relatively low cost even if one of the spouses has less than good health. This is because both spouses are being covered, and this helps to negate the effects of the one in poor health – enabling the total premium cost to be less than it would be otherwise if both were insured separately. It is possible that this type of an insurance policy may be issued even if one of the spouses would be uninsurable under other types of policies.

Other Uses of Survivorship Life Insurance

Another use of this type of policy is to provide a safe way for a business to be passed on to the heirs. Providing money to pay estate taxes, it would enable the intended heirs to be able to receive the business intact. If one or two family members inherit the business, but other family members are not interested in it, this type of policy could be a good way to provide an equal cash amount to them.

Parents who have a child that is going to need perpetual care can also be provided for after they are gone with this type of policy. The money could be used to establish a trust to meet the future needs of the dependent.

Some additional benefits of a survivorship life insurance policy are that the benefits are usually tax free for the beneficiaries. Premiums may also be flexible, depending on the type of policy obtained, and they are sold as whole life policies, and in the variations of whole life.

Some Attractive Options

Insurance companies often have a number of options available that can make this kind of policy even more attractive. You could add, for instance, an option that will give your beneficiaries a guaranteed income for life. Another rider will enable your premiums to continue to be paid if you should become disabled at some point, which means that your survivorship life insurance policy will remain intact.

Tags

Life Insurance Policy, Second To Die Life Insurance, Survivorship Life Insurance, Survivorship Life Insurance Policy

Meet the author

author avatar Mike Valles
Hi. I have been a full-time freelancer for over 9 years. Most of the material I write on deals with personal finances, education, and news. I am a published author with a book and several eBooks.

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