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Second to Die Life Insurance
Whenever you get a life insurance policy, two of the most important things to consider are:
- Who do you need the policy to benefit?
- How do you need the policy to benefit these people?
For some people, it’s important to have a policy that provides ongoing support for children who are still dependents. But what if your children are full-grown or you don’t have any children? Then, the dynamics of your life insurance policy are completely different. However, even if you don’t have children there very well may be someone you want to benefit from your life insurance policy, i.e. other family members, charities, pets, etc.…
First to Die Life Insurance
Please note: Unfortunately, we do not offer first to die coverage. To the best of our knowledge, this product is no longer offered by any carriers.
If you do not have kids and the person you want to cover is a business partner or a spouse, then a first to die life insurance policy might be what you need.
The way it works: The first to die policy is a joint life insurance policy that covers two people at the same time. Just like the name suggests, a pay out is given to the survivor of the first to die. The policy ends at the death of the first to die.
Who it’s good for: A first to die policy is good for people who are using life insurance as a way to supplement one’s income. Suppose you are a two-income couple, and the death of one will leave things financially tight for the surviving person. A first to die policy will help alleviate this worry by providing a supplementary income for the survivor.
Another great use is for business succession planning in the form of key man life insurance. For example, suppose you are in business with a spouse, a first to die life insurance policy can be a great way to provide an immediate income stream to the surviving spouse in order for the survivor to either wrap up the business, sell the business, or provide additional funds to hire a replacement.
Why get it: Lower cost—this joint policy is usually more affordable than getting two separate policies.
Drawbacks: In some cases, particularly when there are young children involved, only having coverage on one parent may not be ideal in the event that both parents should pass.
Survivorship Life Insurance Benefits
A survivorship life insurance policy, also known as second to die life insurance, is a joint policy that covers two persons. Unlike the first to die policy, the second to die policy offers a pay out after both parties are deceased. Indexed Universal Life Insurance can provide a good option for those considering second to die policies. You may also want to consider single premium universal life insurance.
Who it’s good for: If you and your partner/spouse’s main priority is to provide for your children, and supplementary income for the surviving spouse is not required, then you might want to consider survivorship life insurance.
For your kids
You may also want to speak with your children and see if it makes sense for them to help you pay for your second to die life insurance policy. After all, if your kids will be the beneficiaries of the policy, then it makes sense for them to take a vested interest in making sure the policy remains in force. Further, the leverage provided by life insurance will create a great return for your children on the money they helped contribute towards the policy.
A survivorship life insurance policy can also be used for business succession. However, in contrast with a first to die policy, a second to die policy can be used to postpone a buy sell agreement funded with life insurance. For example, if a husband and wife are business partners owning a one half interest, the couple may purchase survivorship life insurance so that the policy pays out on the death of the surviving spouse.
Why get it: There are many great reasons to consider second to die life insurance, including:
- Funding a buy sell agreement where both spouses own a portion of a business.
- Paying estate taxes, possibly through an irrevocable life insurance trust.
- Leveraging your wealth through estate planning with life insurance for use in
a.) leaving an inheritance for your children, such as through a Family Trust; or
b.) leaving an inheritance for a charity
Drawbacks: This is not meant to provide income replacement to a surviving spouse because your surviving spouse will not benefit from the life insurance policy in his/her lifetime.
What is a “spendthrift clause”?
This is something that is optional in many second to die life insurance policies. A spendthrift clause allows you to set up a payment plan, releasing the policy’s pay out over time rather than all at once.
Why get it: This is an excellent option if you do not feel the recipient of your life insurance policy pay out is financially responsible to receive a large sum of money all at once. Essentially, the beneficiary has no ability to change the settlement option and cannot borrow from the funds or assign the proceeds to creditors or lenders.
Drawbacks: If your beneficiary dies before the total sum is paid out, the remaining money may be lost “in the system”. However, there are some legal measures that can be taken to prevent this.
Which life insurance companies offer a first to die policy?
Currently, the first to die policy isn’t available through any life insurance providers that we are aware of. In order to find out which life insurance policy offers the best second to die policy for you, it’s best to speak with an expert in the insurance industry. Better yet, speak with one who doesn’t have a vested interest in selling you a policy from any particular life insurance company. That’s us—TermLife2Go.
We at TermLife2Go are life insurance experts with years of experience finding people like you the right policy. If you are looking for a first or second to die policy, but don’t know where to turn, we can help! Getting a life insurance policy is about much more than simply deciding on the type of policy (though that in itself is a huge deal!)
Other things you need to consider are you and your partner’s:
- Lifestyle Choices
All of these things will factor in when deciding on the best life insurance provider and policy for you and your spouse. A joint life insurance policy that’s right for your neighbors may not be the joint life insurance policy that’s right for you and your spouse or partner.
TermLife2Go will take the time to understand the unique dynamics associated with your exact case. Only when we thoroughly understand your needs, criterion, and situation will we provide a shortlist policies and providers for you. We don’t make blanket recommendations—we customize each and every recommendation to ensure that the policies and companies are most suitable for you to help you find the most affordable life insurance.
If you would like a free life insurance consultation to better understand if a joint policy such as a first to die or second to die policy is right for you and your spouse or partner, then contact TermLife2Go today.
Thank you for reading our article, Survivorship Life Insurance: First and Second to Die. Please leave any questions or comments below.