Second To Die Life Insurance

Second to die life insurance is a form of life insurance that does not pay out immediately when the insured party dies.

It is not the right type of insurance for everyone but is a recommendation for those who have highly valuable estates, such as those worth over $1.5 million.

Those who have estates valued at this level often have to manage costly estate taxes and this type of life insurance policy is one way to avoid paying too much.

What Is It?

Also referred to as survivorship life, this type of insurance insures two people, rather than the typical one person.

Usually, it insures a husband and a wife.

When a traditional life insurance policy is in place, the death benefit is paid once the insured person dies.

With second to die life insurance, the policy pays out only when the second person dies that is insured by the policy.

This type of life insurance has several key advantages.

First, it allows the couple to pass along a sizable inheritance to their heirs without the costs associated with estate taxes. Life insurance benefits are not taxable. In some cases, the individual will use the life insurance death benefit as a way of paying the estate taxes owed on the rest of their estate.

In the early 1980's, when this policy was developed, new laws were enacted that allowed for the estate to pay taxes one time, rather than twice. For example, a couple could design their estate plan to allow for taxes to be paid only after the second spouse dies, rather than paying taxes after the first and the second dies. The benefit here is the reduction in death taxes.

Benefits of Second To Die Life Insurance

Why should you purchase second to die life insurance rather than other types?

  • It is less expensive than having two, single policies covering each of the spouse's individually.
  • It is easier to qualify for, since both parties must die for the death benefit to be paid.
  • It is a good way to build the value of your estate without having to worry about adding excess tax burden to your heirs.

Remember that as part of your estate, this type of insurance policy is able to help your heirs pay estate taxes.

It may also serve as part of that estate in providing an inheritance to a loved one.

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