Second To Die Policy

A Life Insurance Guide

The Pew Research Center reports that 60% of American households, with children under the age of 18, have two full-time wage earners. Most U.S. families rely on multiple incomes simply to juggle all their modern expenses.

However, recent reports state 7 out of 10 American households still do not have enough available funds to cover the cost if one of those primary wage earners were to pass away.

Yet many of these American families are putting off purchasing life insurance because they need to put their money towards other financial responsibilities. Purchasing joint life insurance, like a second to die policy can be a great solution to this financial dilemma for both couples and business partners.

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Joint Life Insurance Policy: First-to-Die vs. Second-to-Die
Pros and Cons of a Second to Die Policy
What is a Second to Die Policy Best For
Best Second to Die Life Insurance Companies
How Much Do Second to Die Policies Cost?
Second to Die Policy Riders
Finding the Best Second to Die Policies for Seniors

Second To Die Policy for life insurance

Joint Life Insurance Policy: First-to-Die vs. Second-to-Die

Joint life insurance policies can be either a permanent (whole) life insurance or term life insurance policy. There are two types of joint life insurance policies: First-to-Die and Second-to-Die (aka “survivorship”) life insurance.

First-to-Die Life Insurance

First-to-Die joint life insurance is when a couple or business partners purchase a permanent or term life insurance together. The life insurance coverage is issued as one policy with one premium amount but names two insureds (usually a couple or business partners).

Under the first-to-die joint life insurance policy terms, the life insurer would pay the face amount when the first person dies. The remaining partner will receive a lump sum death benefit.

Once the death claim is paid then the policy is null and void. The remaining insured would no longer have life insurance. He/She would have to shop for their own life insurance policy. Families that do have children and both spouses work would greatly benefit from a first-to-die life insurance policy.The premium would be less than paying for two separate life insurance plans. Yet both working parents are covered so the payout from a death claim would certainly help cover the lost spouse’s missing income.

Same as any life insurance policy, a growing family would benefit greatly from a first-to-die life insurance policy because it would help cover burial costs, mortgage payments, credit card debts, car loans, and childcare expenses.

When it comes to life insurance for business owners, the payout from a first-to-die policy could provide a company with much-needed cash to continue operations and cover business debts in the event of a principal partner dying.

There are a handful of life insurance companies that sell “first-to-die” life insurance coverage while many others allow you to add a “first-to-die” benefit rider to a traditional permanent or term life policy.

Second-to-Die Life Insurance

Second-to-die joint life insurance policies (also called “survivorship” or “last survivor” life insurance) are different because these policies payout when the second insured dies. There is no death benefit for the first insured that passes.

After the first insured dies, the second insured will continue to pay the life insurance premium until he/she passes away. At that point, a death benefit will be paid to the named beneficiary.

Survivorship policies are mostly used for small businesses or for extremely wealthy individuals that maintain large estates. Last survivor life insurance is intended to protect personal or company assets from being hit with inheritance taxes.

For example, let’s imagine a wealthy man runs a successful trucking company. The man passes away and leaves his portion of the trucking company to his spouse.The widow’s children are all grown and she has money in the bank to cover burial costs and other expenses. Since the man passed along his company stocks to his spouse there is no inheritance tax due. The widow or widower would have no need for a traditional life insurance death benefit.

However, when the widow dies, her children (or other heirs) will be subject to an inheritance tax bill so they might be forced to sell the business or liquidate other assets such as the family home.

If this wealthy husband and wife had purchased a second-to-die (or “survivorship”) life insurance plan then the heirs would use that death benefit to cover the inheritance tax. This would allow the heirs to retain the business and other important possessions such as the family home.

Pros and Cons of a Second to Die Policy

Just like any insurance policy, there are both advantages and drawbacks to second to die policies. As a person interested in purchasing life insurance, it is important to know both to decide if second to die life insurance is right for you.

Pros of Second to Die Policies

The main pro for any joint life insurance policy is having one premium rather than two premiums for life insurance coverage.Young family with second to die policy

For a new business or a young family, the extra cost of a second life insurance policy can actually be a deterrent from securing life insurance altogether. The savings that a joint life insurance policy offers can be a huge benefit.

In most cases, a joint life insurance policy is underwritten a bit different than a single life insurance policy and this can be very beneficial if one of the partners has some health issues.

For example, underwriting looks at the average age of the proposed insureds and uses that to contribute towards premium calculations.

This means if the husband is 45 years old and the wife is 35 years old the underwriter will base the rate on the average age of 40 years old.

So the older spouse is basically receiving a discount on the life insurance coverage in comparison to taking out his own single life insurance policy.

Underwriting will also look at the insured’s health as a group which is more beneficial for partners that do have health issues which would normally increase their premium.

The overall medical underwriting for joint life insurance policies tends to be more lenient than a single insured policy which results in a better chance of insuring a normally uninsurable partner.

Cons of Second to Die Policies

Despite there being numerous benefits to buying a joint life insurance policy, many life insurance agents warn against doing so for a few practical reasons.

For example, what will you do if you and your spouse (or business partner) have a joint life insurance policy and decide to part ways in the future?

You’ll be very frustrated if you’ve been paying a life insurance premium for ten or twenty years only to decide the policy will need to be undone.

Plus, now that you are ten or twenty years older, your rates for a single life insurance policy will be more expensive. If you’ve also developed any medical issues, you will face challenges in the medical underwriting of a single life insurance policy.

One solution is to find out from the life insurer if they will allow an optional rider providing for the right to split the policy in case of a business separation or a divorce.

What is a Second to Die Policy Best For

In addition to the above merits for joint life insurance policies, a survivorship (or “last survivor”) life insurance plan includes the following benefits:

Caring for a special needs child

What will happen to your special needs child after both you and your spouse are gone? The death benefit from a second-to-die (survivorship) life insurance policy can be used to provide ongoing care to your special needs child.

It’s often recommended that you and your spouse set-up a special needs trust so the benefit from your life insurance policy will not alter your child’s government benefits. Remember, the benefit from a survivorship policy is tax-free.

Paying estate taxes

As we reviewed earlier, the death benefit paid to the named beneficiary can be used to pay any outstanding inheritance or estate taxes. This means children (or any heirs) will not have to liquidate important assets such as homes and businesses to cover the death tax.

Leaving a legacy

The proceeds from a survivor life insurance policy can be left to a favorite charitable organization of your choice. If you’ve spent your life donating funds to an important charity organization, church, or university then this may be a great option. A second-to-die life insurance policy will allow you to make a large donation after your passing.

Best Second to Die Life Insurance Companies

The best joint life insurance companies really depend on you. What is your budget? What are your unique policy preferences? The answer to these questions varies from one insured to the next.

We can tell you a handful of excellent life insurance carriers that do offer joint life insurance policies. You will have to decide if they are best for you and your spouse (or business partner).

Company A.M. Best Rating Customer Reviews
Prudential A+ 4.3 / 5
Protective Life A+ 4.1 / 5
North American A+ 3.9 / 5
Ameritas A 4.0 / 5
John Hancock A+ 4.0 / 5
MetLife A+ 4.1 / 5
Transamerica A+ 4.2 / 5

Each life insurer offers different rates depending on you and your partner’s age, medical history, policy type, as well as other individual factors like the face amount selected. However, we are able to provide you with an estimated life insurance rate for joint life insurance policies.

How Much Do Second to Die Policies Cost?

The rates listed below are simply intended to give you a better idea of your cost for covering two people as opposed to one. It’s worth noting most joint life Business partners with second to die life insurance policiesinsurance policies are between $250,000 to more than $1 Million in coverage. In fact, the majority of survivorship policies are in excess of $1 Million dollars because of the partner’s overall wealth and possible corporate responsibilities.

Let’s review a generous $1,000,000 joint life insurance policy, guaranteed death benefit. The quotes assume both insureds are non-smokers and in good health.

Age of Both Insureds Guaranteed Monthly Life Insurance Premium – Total for Joint Policy Guaranteed Death Benefit Tax-Free
50 $403 $1,000,000
55 $537 $1,000,000
60 $665 $1,000,000
65 $822 $1,000,000
70 $1,055 $1,000,000
75 $1,629 $1,000,000
80 $2,320 $1,000,000

In comparison, let’s review the same $1,000,000 individual permanent whole life insurance policy. This quote also assumes both individuals are in good health and non-smokers.

Age of Both Insureds Guaranteed Monthly Life Insurance Premium – Total for Two Individual Policies Guaranteed Death Benefit Tax-Free
50 $1,342 $1,000,000
55 $1,752 $1,000,000
60 $2,194 $1,000,000
65 $2,926 $1,000,000
70 $4,112 $1,000,000
75 $5,694 $1,000,000
80 $9,138 $1,000,000

Finally, let’s look at the a $1,000,000 individual 20 year term life insurance policy. This quote also assumes both individuals are in good health and non-smokers.

As you can see, life insurance for people over 60 begins to get increasingly more expensive.  For seniors who need life insurance, we recommend comparing more options in order to find the best life insurance rates.

Age of Both Insureds Guaranteed Monthly Life Insurance Premium – Total for Two Individual Policies Guaranteed Death Benefit Tax-Free
50 $244 $1,000,000
55 $396 $1,000,000
60 $663 $1,000,000
65 $1,249 $1,000,000
70 $2,595 $1,000,000
75 Not Available Not Available
80 Not Available Not Available

It’s important to note that once a traditional term life insurance policy reaches the end of its contract period then the policy is done and there is no additional death benefit.

Occasionally, at the end of a term life insurance policy, you may have the option to convert the coverage into a permanent plan. However, you will then be subject to a new rate at your current age which can make the life insurance policy much more expensive.

Second to Die Policy Riders

The majority of life insurance companies offer their customers optional riders including the accidental death rider, guaranteed insurability rider, waiver of premium rider, and the family income benefit rider.

These types of riders are very beneficial to the insured and we recommend you consider adding them to your life insurance policy.

There is usually an additional charge factored into your monthly premium for each rider. However, the financial benefits of these types of riders far outweigh the minimal cost charged by the life insurance carrier.

Accidental Death or Double Indemnity Rider

The addition of this rider will double your death benefit amount if you die from an accident.  Often the policy will stipulate an age when this coverage will expire. Pay close attention to the life insurance policies definition of “accidental”, which is often very restricted.

Guaranteed Insurability Rider (aka Renewal Provision)

This provision guarantees the term life insurance policy’s renewability at the end of its contract. If you decide to renew your policy, you will not be required to provide additional proof of your insurability. This insurance rider may expire at a certain age so be sure to read the fine print.

Waiver of Premium Rider

This extra insurance rider usually states that if you become disabled after turning 65 then your life insurance premiums will be waived. Often the rider will state that the premiums you paid during the six months of disability will be reimbursed, but it depends on the insurance company.

Once you are no longer disabled, you are required to begin paying your premiums again. However, you do not have to go back and pay any missed premiums for the period of time you were disabled. Your life insurance policy will clearly define what is considered “disabled”.

Family Income Benefit Rider

This insurance rider guarantees your family will continue receiving your monthly income if you die. This is a great rider to purchase for first-to-die joint life insurance policies where the family only has one income source. The life insurance company will ask you to select a length of time your family will continue to receive your monthly income.

Of course, the longer the period of time the more costly this additional rider will be. Most income benefit riders will decrease over time and eventually expire completely. The idea is that over the years your children will grow and begin supporting themselves so the income guarantee will not be as important.

Finding the Best Second to Die Policies for Seniors

When it comes to finding the best second to die survivorship life insurance policy, it is very important to be sure that you have weighed all of your options before making a purchasing decision.

To find the best second to die life insurance rates, simply use our online quoting tool, or speak with one of our agents today.  Our independent life insurance agents can compare coverage from dozens of the best survivorship life insurance companies to find you the best policy for your specific needs.

Get a second to die life insurance quote below, or give us a call today!

Second to Die Life Insurance Rates

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