What Is Second-To-Die Insurance?

Second-to-die insurance, also known as dual life insurance or survivorship insurance, is a type of life insurance that covers two people who are usually, but not always, a married couple. Unlike traditional life insurance, which pays a death benefit to the surviving spouse or other beneficiary after the policyholder passes away, second-to-die insurance doesn’t pay a death benefit until both policyholders are deceased. Survivorship insurance is most commonly used as a way to help the beneficiaries regarding estate planning and paying estate tax. Still, there are other purposes, including that of estate building and providing security for heirs with special needs. Most insurance carriers who specialize in life insurance sell second-to-die insurance, and agents will help make sure potential policyholders purchase the right type and amount of coverage depending on their reasons for buying a policy.

Generally, the people who purchase second-to-die insurance mean for their policies to benefit their heirs. The policyholders’ children are usually, but not necessarily, the heirs or beneficiaries of the insurance policy. Typically, policyholders purchase second-to-die insurance for estate planning purposes. Most often this means the beneficiaries will use the death benefit to pay estate tax. Sometimes, though, policyholders will work with their agents to design the policy so that it helps build their estates, too.

Although estate planning might be the most common reason for purchasing second-to-die insurance, there are additional reasons policyholders purchase coverage. For example, survivorship insurance is becoming an increasingly popular way for parents of special needs children to ensure their children are financially secure and cared for after their parents’ deaths. Generally, parents also will purchase individual life insurance and will consider individual disability insurance to provide their children with the most possible protection. It’s also common for life insurance policyholders to use their policies for charity reasons, and this is true for holders of survivorship insurance, too. For example, policyholders who don’t have children or heirs might purchase a dual life insurance policy with the intention of helping support their favorite charity.

People can purchase second-to-die insurance from most insurance carriers that sell life insurance. Typically, this insurance is available as variable universal and whole life insurance policies. Since the policy insures two people, it’s usually less expensive than a traditional individual life insurance policy. Also, insuring two people can make survivorship insurance easier to purchase because the company might be less concerned with the ill health of one of the party. Before purchasing survivorship insurance, potential policyholders should ask their agent about how divorce, the death of their heirs, or changes in estate tax laws will affect their policies.