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Second to Die Insurance- Understanding how Joint Coverage works

Second to die insurance can be a worthwhile purchase when people have heirs who will be required to pay large taxes. A second to die or survivorship life insurance policy insures two lives, typically spouses. Unlike conventional life insurance, death benefit is only paid out when the second insured person has died.

Second to Die Life Insurance Policies

The death benefit from second to die insurance policies is usually intended to cover federal estate taxes along with other settlement costs that are owed after the two people pass away. This product was developed as a response to the law that allows spouses to put off federal estate taxes until they both pass away.

If you leave your assets to your wife or husband, federal estate taxes will not be owed when you die. These assets become a part of the spouse’s estate and may be taxed upon the surviving spouse’s death. The death benefit derived from life insurance policies can help to pay the taxes.

Estate Planning

When agents sell second to die insurance, they usually point out the fact that beneficiaries will be able to use the proceeds of the policy to pay estate taxes. This means that they will not be compelled to liquidate assets or sell your home quickly to pay estate tax bills.

If you buy second to die whole life insurance, you will pay a lower amount than the cost of the estate taxes. Life insurance agents and lawyers occasionally come up with a financial plan to minimize the tax burden of wealthy people through trusts and second to die insurance within a strategy for estate planning.

More Affordable

Second to die insurance is often less expensive in terms of death benefits than conventional single life insurance. Under the circumstances of second to die policies, premiums are determined by the life expectancy of the two people who are insured. Since the insurer does not owe anything until both the insured people die, the cost of the premium will be more affordable than purchasing separate policies for individuals.

Easier to Purchase

It is generally easier to qualify for second to die insurance policies than for life insurance to insure one person. Since both survivorship life policyholders must die in order for benefit to be paid, the insurance provider is not as concerned about one of the people not being in good health.

Insurance companies are usually willing to provide the policy even when one customer is regarded as uninsurable according to conventional life insurance standards. However, each insurer has its specific definition of who is uninsurable.

Building your Estate

Second to die insurance can be considered as an estate building solution in some cases aside from insulating an estate from taxes. Similar to conventional life insurance, the survivorship life policy death benefit can ensure your beneficiaries receive minimal amounts of funds even if you end up spending all your money during your lifetime.

Preserving your Estate

Second to die insurance policies are appealing to people who want to be able to preserve their assets for future generations and theirs. They can purchase a second to die policy so that they can transfer their intact estate to heirs and taxes are paid by the benefit from life insurance.

Simon Morris is as writer, research consultant and finance analyst. He is passionate about helping people achieve their financial goals and establish a secure future through informative articles and other medium channels.
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