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Survivorship life insurance provides coverage for two people on the same insurance policy. The death benefit in this type of insurance policy is not paid out till the second person dies. Survivorship life insurance is also known as second-to-die insurance.
Costs of survivorship life insurance
As survivorship life insurance covers two people on the same policy, the premiums are comparatively much higher compared to a regular policy. Survivorship life insurance is often resorted to when someone wants to provide protection from excessive estate taxes for their heirs, when they die. Survivorship life insurance is appropriate for individuals whose net wealth is worth more than $2 million. This kind of insurance is an effective estate planning tool to preserve the value of the estate.
Suitability for Survivorship Life Insurance
Survivorship life insurance is designed for wealthy individuals and is not appropriate for everyone. It must be realized that the complexities of estate planning require that the insured person should consult with legal and tax professionals. Again, if cost is your major consideration, you should not go for this type of insurance policy and instead, look for term life insurance for a low cost premium.
Survivorship life insurance and protecting estate
If someone wants to protect their estate after they die, they should look for survivorship life insurance as a valuable tool. A good illustration is provided from the Mass Mutual insurance website:
“If you are married, then within federal limits, your estate will pass to your spouse free of any federal estate taxes after your death. However, when your spouse dies, taxes become a serious problem to your heirs. The proceeds of death benefit of survivorship life insurance policy can provide funds that can pay the estate taxes and reduce or eliminate liquidation of your estate for your heirs”.
The above description very well clarifies how survivorship life insurance protects the estate from heavy taxation. Depending on the estate size, the estate taxes can go up to 55%. To help out the beneficiaries from these heavy taxes, the death benefit payout of survivorship life insurance comes as a protection. This kind of protection is important to the heirs from paying the heavy taxes and forcing them to lose family estate or business.
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