Second-to-die life is used if one half of a couple is uninsurable but they need a life policy to pay estate taxes. It’s also called survivorship insurance (mostly for spouses).
Second-to-life life insurance is for people who have a large estate and want to pay the inheritance tax.
Second-to-life life insurance is not for people who have a small estate
Second-to-die advantages:
- Can be affordable
- Easier to qualify for than two separate policies
- Can create an estate at death
- No estate taxes on benefit
- Premium may be cheaper
- Proceeds go directly to the heirs
Second-to-die disadvantages
- Isn't paid until second death
- Policy might not be dividable
- Only for very large estates
- $100k-250k minimum
- Only for estate taxes
- May charge higher premiums
- Death benefit may be taxable
Second-to-die money saving tips:
- Don’t get it if you have a small estate
- Don't buy more than will cover your final expense
- Don’t get it if your estate planner can eliminate your estate tax
- Get at least two proposals from an independent agent
- Find out if you're a standard risk before you get your physical
- Pay your life insurance premiums on an annual basis
- Review your policy annually so that you're not under or over insured
- Get a periodic health exam to prevent health problems
- Never take drugs, alcohol, and cigarettes before a insurance exam
- Make sure you’re given a quote for YOUR HEALTH CLASS
- Divulge ALL health problems to your agent
Summary: Find out if the company offers you a rider that permits you to split up the policy in case of divorce. Also, think about other ways to finance or reduce your estate taxes through tax planning and gifting.
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