Life insurance is a crucial element of any comprehensive estate plan. Including life insurance in your financial strategy can provide significant peace of mind for you and your loved ones. Among the many types of life insurance, survivorship life insurance is a specialized policy designed to cover two people—usually spouses—and payout upon the death of the second individual. Below, our Mechanicsburg estate planning attorney explains survivorship life insurance and highlights its benefits as an estate planning tool.
What Is Survivorship Life Insurance Coverage?
As explained by the Government Employees’ Benefit Association, survivorship life insurance—often called “second-to-die” insurance—offers joint coverage for two individuals. Unlike traditional life insurance policies that pay a death benefit when the insured person passes, this policy only provides a payout after both insured parties have died. The payout, which goes directly to the beneficiaries, can be used for various purposes, such as covering estate taxes, funding trusts, or ensuring a legacy for heirs.
Survivorship Life Insurance Is Most Commonly Used by Couples
Although survivorship life insurance is not limited to married couples, it is primarily used by them as part of their estate planning strategy. This type of policy is particularly attractive to couples who want to ensure financial security for children or grandchildren. Because the payout is contingent upon the passing of both insured individuals, premiums for survivorship life insurance tend to be lower than the combined cost of purchasing two separate life insurance policies. This cost efficiency makes it an appealing option for couples aiming to maximize their financial planning efforts.
The Estate Planning Benefits of Survivorship Life Insurance
Survivorship life insurance offers a range of advantages, making it a powerful tool for estate planning. Here are some key benefits:
- Cover Estate Taxes: One of the most significant benefits of survivorship life insurance is that it provides liquidity to help beneficiaries cover estate taxes and other expenses. These taxes and fees often become due shortly after the passing of the second insured individual, and the payout ensures heirs are not forced to sell assets to cover the costs.
- Wealth Preservation: This policy can help preserve wealth for future generations. The death benefit serves as a financial safeguard, supplementing other assets and providing a lasting legacy for children, grandchildren, or other loved ones.
- Cost-Effective Coverage: Compared to purchasing two individual life insurance policies, survivorship life insurance generally has lower premiums. It allows couples to achieve substantial financial protection for a fraction of the cost, making it an excellent option for middle-class families and high-net-worth individuals alike.
- Special Needs Planning: For families with dependents who have disabilities, survivorship life insurance can fund a special needs trust. This ensures long-term financial support for the dependent, even after both parents have passed away, and protects the dependent’s eligibility for government benefits.
Contact Our Mechanicsburg Estate Planning Lawyer
At Keystone Elder Law P.C., our Mechanicsburg estate planning attorneys have extensive experience assisting families with survivorship life insurance policies and other estate planning strategies. If you have questions about how survivorship life insurance can fit into your estate plan, we are here to help. Contact us today to schedule a confidential consultation. From our office in Mechanicsburg, we proudly serve clients throughout Cumberland County and the surrounding areas.