Ever wondered if you can get an insurance policy to cover both you and your spouse, and the payout should be made to your children and/or beneficiaries after you both are gone?
Well, wonder no more! This is because you can actually get it!
The type of policy that offers exactly everything I mentioned above is called Survivorship Life Insurance Policy.
We are going to be discussing lengthily on the survivorship life insurance, and you should follow the train if you have a plan to get the insurance policy.
Areas under the survivorship life insurance that we'll be talking about include;
• What Is Survivorship Life Insurance?
• How Survivorship Life Insurance Works
• Instances Where The Survivorship Life Insurance Policy Is Used
Let's get down to business.
WHAT IS SURVIVORSHIP LIFE INSURANCE?
Survivorship Life Insurance is a type of joint life insurance policy, which was created and is designed to cover two individuals(spouses most of the time) instead of just one, unlike many other forms of insurance.
A benefit is paid only after the two insured people's deaths.
Some couples may find the policy to be convenient and useful, but some couples do not see it so.
This is mostly when the couple depend on each other's income and contributions for the family care. They will both prefer to have different policies to their names, not the same, and they will name the other spouse as their beneficiary.
There are many situations however, where a single survivorship life insurance policy and payout is helpful and may also be preferable.
HOW SURVIVORSHIP LIFE INSURANCE WORKS
Survivorship Life Insurance is a form of Joint Life Insurance, and there are basically two forms of Joint Life Insurance.
They are;
First-to-die policies
And
Second-to-die policies.
The names of the types of policies should already ring a bell, because they're already telling you what each respective policy is all about.
If you still don't have an idea, simply read on.
First-to-die policies consist of the payout of a death benefit after one person out of the two insured individuals dies. In this case, the payout is made to the beneficiaries of the person that passed away.
Second-to-die policies, which is the exact insurance policy that this article was made for, widely known as Survivorship Life Insurance Policy, consists of the payout of a death benefit after the second surviving person out of the two insured people passes away.
For reasons too obvious, these policies are not and can not be used in the provision of replacement of income for any surviving spouse, to be part of their retirement strategy.
The payout must go to the two people's or couple's beneficiaries instead.
It should also be noted that the beneficiaries of a survivorship life insurance do not necessarily have to be the couple's relatives or children. It can be the couple's trusted friends, or loved ones.
The policy also makes possible the transfer of assets to individuals that are not in anyway related to the insured - even business associates.
It is also possible for the insured to leave the payout as a legacy to a favorite charity organization, or to fund family business - this means that the beneficiary doesn't even have to be a person!
It's the reason these types of policies are preferably chosen when it comes to estate planning strategies.
Survivorship Life Insurance Policies are mostly purchased with Whole Life Insurance Policies in Term Life insurance's stead.
There's a simple reason: Most, if not all of the couples purchasing a survivorship life insurance policy do not actually want a protection that is temporary.
Say, the policy expires before any of the couple's death, there is absolutely no death benefit to be paid, so that equals to waste of money.
Also, a whole life insurance builds cash value which, if needed, can be drawn on.
This is why, even many insurance companies do not offer survivorship life insurance coverage with term life insurance option.
INSTANCES WHERE THE SURVIVORSHIP LIFE INSURANCE POLICY IS USED
Below are some situations where survivorship policies may be useful.
✓ In Planning Business Succession
Survivorship life insurance policy holders, like I said before, can be two people. These two people can be business owners too.
So, the kind of liquidity needed to transfer ownership of business to another party after the demise of both initial owners can be provided by survivorship life insurance.
Or in other cases, the owners' heirs can get a death benefit divided between them to ensure that they have enough finance to take over the business.
✓ In Planning Estate
In the case of couples with high net worth who intend to make sure the tax burden on their children is lessened after their demise, survivorship life insurance sounds like a perfect plan.
This is because the policy makes it possible for the provision of immediate cash flow to ensure the settlement of estate taxes payment and other related costs once the couple passes away.
In cases where a family business which can't be easily sold is to be shared, in the course of equalizing the distribution of assets between heirs, the policy can also help.
✓ In Charity Giving
The policy can ensure that a legacy is left to a specified charity organization prior to the death of both policyholders, if that is their wish.
Universal life insurance can be valuable for this, due to its flexibility.
This is because it makes possible the growing of tax-deferred cash value that can be accessed still, and can increase or decrease the premiums paid as preferred at that point in time.
✓ In Covering Medical Issues
In the case where a spouse can not get individual life insurance due to a medical issue but the other spouse is in total good health, the policy can be a more cost-effective way to get coverage.
✓ In Special-needs Planning
The policy makes it possible for couples who have a child or children that needs special care to be able to ensure that their child(ren) is/are taken absolute good care of after they(the couple) have passed away.
Sometimes, the policy is also used to fund a trust designed to provide care for Special-needs children.
