Survivorship life insurance, also known as joint and survivor life insurance or second to die life insurance is a special type of insurance that covers two people, usually man and wife, and pays the benefit after both have died.
In general, the purpose of life insurance is to give a lump sum of money to help with financial obligations when someone dies. This type of joint life insurance accomplishes this for a specific obligation; to pay the estate taxes due when both parents are gone. Years ago, estate taxes became due when any person of wealth died. Under Reagan the law changed and estate taxes could be delayed for a couple until both died, thus second to die insurance or survivorship insurance became popular as a means of creating the cash to pay the tax obligation.
The pricing for survivorship life insurance is lower than that for an individual whole life insurance or universal life insurance policy because, statistically, the insurance claim is more likely to be paid later than life insurance covering just one person.
The funds are designed to arrive at the exact time they are needed. These policies usually have a third party owner such as an irrevocable life insurance trust or an adult child or adult children. This way the policy can be set up so that the insurance proceeds are free of estate taxes. If it is owned by the insureds, it would increase the estate and would be taxed.
An attorney should set up and advise you on the proper ownership method for you. Learn more about survivorship life insurance or get a free market analysis of survivorship life insurance quotes from lifeinsure.com.