What is the main purpose of having second to die life insurance?
It is primarily used to cover the estate taxes that become
due when the second spouse passes away. By using the leveraging
ability of Life insurance to provide the capital to pay for
Estate taxes that otherwise could substantially reduce the
estate value as it is passed onto the heirs. Because two lives
are being insured its possible to reduce the over all cost
of the policy and also provide coverage when one spouse may
not be insurable if they attempted to purchase a policy on
their own life individually.
How Should the Policy be owned?
The ownership of a second to die life policy is very important.
If the policy is not structured, funded or owned properly
it could cause the policy death benefit to be included in
the estate of the deceased insured. That would increase the
overall estate and create a larger estate tax exposure. That's
the complete opposite of what the typical second to die policy
is designed for. Because you want to be sure that the policy
has no incidence of ownership by the insured, most policies
are owned by either family members or an irrevocable life
What if one of the insured individuals has a negative health
Because the death proceeds from the policy are not paid until
the second person passes away, it is usually not a problem
to obtain a second to die life policy as long as one of the
individuals to be insured is in good health.
How do the policy premiums differ with a Second to Die Life
Because you are insuring two lives and no death proceeds
are paid until the second insured passes away, the premiums
tend to be lower than if one policy was purchased on the life
of each insured.
What is the best way to go about purchasing a Second to
die Life Insurance Policy?
Because the ultimate cost is based on the underwriting results
obtained from the doctor records, interview and physical that
needs to be done on the insured individuals, the final cost
isn't known until the underwriters have reviewed all the material
information. An illustration is provided prior to underwriting
to give a best efforts estimate based on preliminary information
provided to the agent. The best way to proceed with this type
of policy purchase is to review an initial illustration and
determine if the policy suits your needs and goals. If so,
submit an application and go through the underwriting procedure.
There is no cost for this and the only way to determine your
true policy premiums.