What is a Survivorship Policy?
A Survivorship Policy, also known as a second-to-die policy, is a type of life insurance that insures two people, typically a married couple. Unlike traditional life insurance, a Survivorship Policy only pays out the death benefit after both insured individuals have passed away. It is often used for estate planning purposes, particularly to cover estate taxes or to ensure that heirs receive a financial inheritance.
Survivorship Policies are commonly used to preserve wealth or provide for special needs dependents, offering tax-efficient solutions for transferring assets to beneficiaries. Premiums for a Survivorship Policy are usually lower than those for two individual life insurance policies, as the insurance company is only required to pay the death benefit after the second death.
These policies can be structured as whole life, universal life, or variable life insurance, allowing policyholders to accumulate cash value. The accumulated value can be accessed during the couple’s lifetime, providing a flexible financial tool for estate management or other financial needs.
In estate planning, Survivorship Policies help avoid the potential financial strain on heirs by ensuring sufficient liquidity to handle taxes, debts, or other obligations without having to sell off assets.
