Survivorship life insurance

Designed for two people, a survivorship policy won't pay the death benefit to the assigned beneficiaries until both parties have died.

Logan Sachon

Logan Sachon

Published June 21, 2018

For married couples shopping for life insurance, there are two options: separate or joint policies. While most couples will choose to buy individual life insurance policies for each partner, some couples choose to buy a single joint life insurance policy that covers both partners at the same time.

A survivorship life insurance policy— also called a second-to-die life insurance policy — is a type of joint life policy that can simplify the life insurance shopping process for spouses and can help in cases of estate planning by covering estate taxes and providing for special needs children once both parents are gone.

Read on to find out:

What is survivorship life insurance?

Survivorship life insurance is a type of joint life insurance that pays the death benefit when both policyholders die. The policy covers multiple people, typically spouses, and is also known as a second-to-die policy, since the benefit pays out after the second policyholder dies.

This particular insurance product was initially developed to aid in estate planning. By law, a spouse can leave her spouse unlimited assets without incurring federal taxes; not so for other beneficiaries. So the survivorship life policy ensures that assets eventually left to beneficiaries who are not part of the couple — like children or nieces and nephews — receive a death benefit to pay an estate tax bill.

Is a survivorship policy right for you? There are some important considerations to make when deciding what type of life insurance policy is right for you and your spouse. Some things you should take into account include:

When does survivorship life insurance pay out?

Survivorship life insurance policies are also known as second-to-die policies, which gives you the answer to when these kinds of policies pay out: once both policyholders die, the death benefit is paid. This is different from first-to-die joint life insurance policies which pay out after one of the policyholders dies.

One note: both policyholders do not need to die at the same time for the policy to pay out. If one spouse dies just after the policy is put in force, the benefit will pay out even if the other spouse dies 30 years later (as long as the premium payments have still been made).

What kinds of survivorship policies are there?

There are many types of life insurance, and survivorship insurance policies can intersect with several of them.

The two most basic categories of life insurance are:

  • Term life insurance: Lasts for a set term, usually 5 to 30 years, and has no cash value component.
  • Permanent life insurance: Lasts as long as you keep paying your premiums, plus has a cash value component.

Term life insurance policies with survivorship are rare — very few life insurance companies sell them. Most survivorship policies are permanent life insurance. Under permanent life insurance, there are several sub-categories that can be survivorship policies:

  • Whole life: A type of permanent policy with a cash value and that lasts as long as you pay the premiums.

  • Variable life insurance: A type of permanent life insurance with a cash value that is invested by the insurance company.

  • Universal life insurance: A type of permanent policy with a cash value and the ability to change the premium and death benefit amounts.


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Why are survivorship life insurance policies important?

Survivorship life insurance policies are relatively rare, but they can play an important role in estate planning for some families.

Advantages of second-to-die life insurance policies include:

  • Potentially lower premiums than first-to-die policies or individual policies
  • Easier for less-healthy people to qualify for than an individual or first-to-die policy
  • Can still build up cash value (useful in case the surviving spouse needs to use the cash value)

Who needs survivorship life insurance?

You should always check with a licensed insurance agent or financial adviser to make sure you’re choosing the right type of insurance policy for your financial situation. But in general, there are a few scenarios when survivorship policies may make sense:

If you can’t afford two individual policies

Getting two individual policies for a couple makes sense for a lot of reasons. Most notably, if you get divorced, it’s easier to go your separate ways when you aren’t sharing a life insurance policy. But the premiums on survivorship life insurance policies can sometimes be cheaper than buying two separate policies. This isn’t always the case. Since joint policies are often permanent life insurance policies, they can be more expensive than simple term life insurance policies depending on the policy details, but it’s proof that it pays to compare plans.

If one spouse was declined, but the other is in good health

Having each spouse buy their own policy is a good plan, but if one can’t get coverage because of health issues, you need another option. Some survivorship policies accept spouses who have otherwise been declined (because both spouses have to die for the benefit to be paid out). If a couple wants both partners to have insurance coverage but is running into difficulty for one of them, a joint policy can be a great way to cover them under a single policy.

Survivorship policies can also be structured to help the surviving spouse. Remember, the death benefit doesn’t pay out until both policyholders have died, but one alternative is to have a policy where there’s enough cash value built up after, say, five years to borrow from the policy and pay final expenses. That way the surviving spouse can cover costs but still keeps the policy. Talk to a licensed life insurance agent to find out how you can structure your policy to meet your needs.

If you need to provide care for special needs dependents

Caring for a special needs dependent is a full-time job. That’s why many parents choose to leave money behind in a fund for special needs children so they can be taken care of for the rest of their lives. A survivorship policy that has a cash value that grows over time is a great way to do this.

If you’re considering your options for estate planning

If you want to leave money behind to heirs, or want to allow your loved ones to avoid federal state taxes and income taxes, survivorship life insurance is a common way to do so. Most of these policies are owned by irrevocable trusts — also known as irrevocable life insurance trusts or ILIT — a common way to handle estate planning, and one that should involve a financial planner and attorney.