What is survivorship life insurance?

How does survivorship and joint life insurance work?

Survivorship life insurance insures two people and only pays out the death benefit after both have passed away. Although married couples often purchase this coverage, the joint policyholders aren't required to be married. It's often purchased by a couple as a means of:

• Leaving money to their children
• Estate planning
• Leaving a sizeable legacy
• Funding a support system for a dependent who may require lifetime care

Survivorship life insurance can also be called joint survivorship life insurance or second-to-die life insurance. There are two main types of joint survivorship life insurance policies: permanent and term.

Permanent survivorship life insurance

Permanent joint survivorship life insurance may be issued as either a whole life or universal life policy which pays out a death benefit when both insured individuals die. It also includes a savings component that builds cash value over time.

• Coverage length: Lifetime coverage.
• Cash value: Accumulates over time and can be borrowed against.
• Common policy types: Whole life insurance or universal life insurance.
• Uses: Estate planning, leaving a legacy, or providing financial support for dependents.

Term survivorship life insurance

Term survivorship life insurance is less common than a permanent survivorship life policy. With a term life policy both people on the policy would have to die during the policy term before the death benefit is paid to the beneficiaries.

• Coverage length: Limited to a set term, such as 10, 15, 20, or 30 years.
• Payout conditions: The death benefit is only paid if both policyholders die during the term.
• Risk: Both parties could survive the policy term and receive no payout.
• Uses: May be suitable for temporary financial needs, such as paying off debts.

Learn more about term vs. whole life insurance.

Who should consider survivorship life insurance?

Survivorship life insurance is not for everyone, but it can be a valuable option for couples with particular financial and estate planning goals, which may include:

• Couples focused on estate planning
• Parents of dependents with special needs
• Couples looking to leave a legacy
• Couples seeking cost-effective coverage rather than purchasing two separate policies
• Individuals who need financial support for their family after they're gone

What is the difference between survivorship and joint life insurance?

Technically, a survivorship policy is a type of joint life insurance. A joint life policy is one policy that covers multiple people, usually in the form of joint universal life insurance or joint whole life insurance. The death benefit for joint life policies can be paid out in one of two ways:

• First to die: This is the most common type of joint life policy. A first-to-die policy pays out a death benefit to the surviving spouse (or other beneficiaries) after one policyowner dies. In most cases, the death benefit is meant to help the remaining individual cover living expenses or debts and replace any income lost from the other policyowner's death.
• Second to die (survivorship): This joint survivorship policy only pays out a death benefit once both people covered by the policy have died. These policies often leave behind an inheritance to the insureds' heirs, permanent dependents, or charity.

Pros and cons of joint survivorship life insurance

There are several advantages to a joint survivorship policy, including these pros:

• Assists with estate planning: A survivorship life insurance policy can help in estate planning as a means of leaving money and assets behind while potentially accessing some tax advantages. Consult a tax advisor to understand the tax implications of survivorship life insurance.
• Creates inheritance for heirs: A joint life insurance policy can be a way to leave a nest egg for your heirs to claim once you and your partner have passed away.
• Provides care for permanent dependents: If you and your partner have a permanent dependent, a survivorship policy can be used to provide for them once you've both passed.
• May provide cost savings over individual policies: A survivorship policy can be more affordable than getting two individual permanent life insurance policies, potentially allowing you to purchase more coverage than you'd otherwise be able to.
• May be easier to qualify for coverage: If one of you is having trouble qualifying for life insurance due to your age or health, a survivorship policy can be a way to get coverage or to increase the coverage you're eligible for. That's because both policyowners will be factored into your eligibility rather than just one.
• Partner can use cash value: While the death benefit can't be paid out until both people on the policy have died, the surviving partner can tap into the policy's cash value, if needed, via a life insurance loan.

Second-to-die joint survivorship policies aren't for everyone. The cons of survivorship life insurance include:

• One death benefit: Survivorship policies might not be the choice for couples in good health who can afford the premium for two separate policies. Separate policies allow for the payment of two death benefits, one after each policyowner dies.
• Partner can't be a beneficiary: If you'd like to use life insurance to provide for your partner when you die, you'll need to get separate life insurance policies or a first-to-die joint life policy since survivorship policies require both insureds to pass away before paying out.
• Life changes over time: Joint life policies can be difficult to update in cases of divorce or other significant life changes. When shopping for a survivorship policy, consider asking if it will be possible to split the policy in such instances.

How is joint survivorship life insurance helpful in estate planning?

A joint life insurance policy can be an effective estate planning tool for providing financial resources to preserve the value of your estate and protect your heirs. A joint survivorship life insurance policy can enhance your estate planning strategy by:

• Preserving family assets
• Managing estate taxes
• Funding a trust for your heirs
• Leaving a legacy for future generations or charities

Be sure to consult a tax advisor to better understand the tax implications of joint life insurance.

Choose joint life insurance with the death benefit that meets your needs

You can get a life insurance quote online by answering some questions and exploring your options for death benefit amounts, and other issues related to the lifelong coverage of whole life insurance. Call 1-866-912-2477 to speak with a licensed, Progressive Life by eFinancial representative who can help you choose the best policy for your goals.