Second to Die: A Policy That Insures More Than Two Lives

9 min read
Life Insurance

Most people in the second innings of their life are often worried sick about what is going to happen to their children when they pass on. As a parent, you may be plagued by concerns regarding whether or not your children will be able to handle high estate taxes, or if they will have to sell off the inherited property to pay this tax.

Uncertainties such as these are the primary reasons why many decide to purchase life insurance policies. As per the results of a survey, conducted by the London International Insurance and Reinsurance Market Association, many other factors drive people to avail insurance coverage to secure the future of their kids. Some of these scenarios are:

-Ensuring financial aid for children even after passing

-Leaving inheritance for the rightful heirs

-Paying for college or schooling of a child

However, the primary reasons, at least a year or two ago, for owning a life insurance policy in the U.S. included the transferring inheritance or wealth, saving on investment by getting tax advantages, and creating estate liquidity. That is where the second to die policy enters into the scenario. This insurance product amalgamates and covers all these three aspects. This insurance policy was developed in the early days of 1980’s as a response to the federal law that helped delay the estate tax until both spouses die.

Life Insurance

How do you help your family with the second-to-die insurance?

Estate Planning is the most common reason for purchasing this insurance policy. A kind of life insurance policy that covers two (spouses) or more people on the same policy is generally known as the second to die or survivorship. The term life or whole life insurances are the common ones while this one serves very specific needs of individuals. The survivorship life insurance is cost-efficient. This type of insurance coverage ensures that the survivors receive the benefits when both the insured individuals pass away. The significant difference between regular policies and this one is that the surviving partners do not receive benefits after the death of their spouse. So, it is clear that individuals do not buy this product for themselves, but keeping their heir in mind.

No wonder the survivorship policies are called out by the name of ‘heir care’. Via the unlimited marital deductions, the estate that passes on to the survivor after the death of their spouse is tax-free. However, after the passing of the surviving spouse, the entire estate tax comes due on the shoulders of the heirs. The heirs are subjected to tax-free death benefit that is allowed by the second to die insurance policy so that they can use it to pay the parts of these taxes. Therefore, it is also named as survivorship insurance as it supports the surviving children.

If you compare the cost of policies that strictly cover only two people and the second to die insurance, the latter turns out to be significantly lower.

Why should you consider the survivorship insurance policies?

The cumulative estate taxes that pile up after the passing of both parents can become hard hitting on the surviving children. If you do not want your family to sell off your liquidity assets or maybe your house to pay the bill of the estate tax, you should consider the survivorship insurance. Consequently, you will have to pay less than the actual estate tax cost, and secondly, the payout from this policy will help the beneficiaries to pay the estate taxes. Other valid reasons such as supporting children after parent’s death and funding charities are also there.

Life Insurance

Whom should you contact to avail a second-to-die insurance policy?

When you are about to consider the purchase of this kind of an insurance policy, it is imperative that you get in touch with an experienced professional agent. An insurance agent must be ready to answer all your queries regarding the second-to-die or survivorship policies. You have to clear all your doubts before investing in this. After all, this insurance policy encompasses various aspects such as retirement, marriage, inheritance, death and even the birth of a child.

So, you will surely need the trusted and experienced assistance of professional insurance agents to find the right policy that suits your budget and purpose. A skilled agent may also help you review your existing policies. Be sure that you receive all the help that you need, whether the concern is of finding an insurance policy that allows the heirs to keep the property that you leave behind or even an affordable product that covers you and your better half.

Having talked about the benefits of this insurance policy, you must also inquire the experts about the caveats and downsides of the same.

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