Not everyone needs second to die life insurance, but it can be very beneficial in certain situations. Unlike a traditional term or whole life insurance policy, which pays benefits to a named beneficiary after the death of an insured individual, second to die life insurance actually covers two people. Benefits are paid out only after the deaths of both insured parties. This type of insurance is typically used for:
- Estate Planning: Second to die insurance can be a powerful estate planning tool for couples who expect to leave a significant estate to their heirs. This type of insurance policy can be very beneficial in situations in which the size of an estate passed on to children after the death of both parents will necessitate payment of a significant sum of estate taxes.
- Funding for Care of Special Needs Offspring: Parents with special needs children often take out second to die life insurance policies. Many special needs children will need expensive care throughout their lifetimes, and parents can make sure funds will be available even after their deaths by planning ahead with this type of insurance.
- Charitable Giving: In many cases, couples who want to leave a significant sum of money to charity do so by purchasing a second to die life insurance policy and naming their favorite charity as the beneficiary.
If your needs don’t fall into any of these categories above, chances are you will be better served with separate life insurance policies for each spouse.