Second-to-die or joint couple life insurance policy is a type of life insurance for couples that provide benefits to the heirs only after the second insured person dies. Second-to-die differs from regular life insurance in that the surviving partner doesn’t receive any benefits after one spouse dies. Usually, the death benefit from a second-to-die policy is intended to pay federal estate taxes and other estate-settlement costs owed after the couple pass away. Thus, second-to-die insurance policy is good for estate planning.
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Why Apply for Second-to-Die Life Insurance?
For couples who also happen to be owners of a family business, a joint or second-to-die policy is a great way to help ensure the continuation of the company without interruption due to estate resolution. The joint life insurance policy can be written as a trust in the children’s name. When the second policy holder dies, the joint policy will immediately pass to the couple’s beneficiaries without ever having to be tied up in any proceedings involving the settlement of the estate. However, aside from estate planning, the surviving beneficiary can use the couple life insurance to pay off the remainder of the mortgage if the insured couple still owes a major proportion of their mortgage and they don’t have mortgage life insurance.
Joint Life Insurance Benefits
In truth, joint policy coverage may in fact cost less than maintaining two separate policies and it does offer several potential advantages for couples, including:
- Less expensive. A joint or second-to-die policy is usually less expensive per thousand dollars of death benefits than traditional single-insured life insurance.
- Easier to buy than single insured life insurance. Since both of the couple must die before the benefit is paid, the insurance company is less concerned that one of them might not be in good health.
- Builds your estate. In some cases, joint or second-to-die insurance is marketed as a way to build an estate, not just insulate it from taxes.
- Preserves your estate. A joint or second-to-die insurance policy appeals to individuals who feel strongly about preserving their assets for heirs, with the life insurance benefit used for paying the taxes.
- Life insurance policies let you save and grow money tax-deferred. Joint or second-to-die policies are available as cash value life policies, letting you save and grow without worrying about tax during accumulation.