What is Last Survivor Life Insurance?
A last survivor life insurance, also called survivorship life insurance, is an insurance product created primarily for married couples. However, the name of the product is not as self-explanatory as it seems. The last survivor life insurance is a life insurance policy intended to insure both husband and wife until they both die. This means that if one of the spouses dies, the remaining spouse alive will not receive any benefits such as a large sum of money. This may sound unappealing and most certainly discouraging if the spouse dies and the one left alive has to take care of young children.
Last Survivor life insurance Advantage
Given a scenario where a married couple purchases two separate individual whole life insurances listing the other spouse as beneficiary. Maintaining two separate insurance premiums is much more expensive than paying for one. One of the advantages of purchasing a last survivor life insurance is that you are buying one product to insure two people; thus you are considerably cutting the maintenance of two separate premiums by half. Not to mention that medical underwriting may be eased due to second death payouts with respect to one of the insured. This kind of policy also has lower “economic benefits” that can be reported on federal income taxes because it is classified as a split dollar plan therefore tax burden is reduced.
The greatest advantage of purchasing a last survivor insurance policy is for federal estate taxes. In fact, the insurance policy was designed specifically for this purpose. When one of the spouses dies, federal state taxes aren’t collected but waived. When the remaining spouse dies, the federal estate taxes come due and the remaining children or relatives are given nine months to pay off this large amount. Some may be forced to take out loans or sell properties to meet this due. If a married couple is insured with a last survivor life insurance policy, the remaining children or relatives will be relieved of the burden to pay the federal estate tax because the insurance company will provide the amount from the claimed policy.
Many of the couples who are insured with last survivor life insurance are people who have worked hard all their life to leave their children some measure of inheritance or a legacy. The federal estate taxes are undoubtedly expensive and unavoidable. In order to ensure that their children still get the inheritance that they left, they would want to ensure that they would at least be spared to pay the estate taxes. The beneficiaries of the policy are not only provided financial security but they are also being afforded some financial preservation as they do not have to dip into their own inheritance for the federal estate taxes.
If you are interested in purchasing a last survivor life insurance policy, there are many sites online that provide free quotes and can help you find an agent. Like most insurance products, the cost and availability of this life insurance policy is dependent on factors such as age, health, and amount of insurance that you want to buy.