Conversations about the future are inevitable when you are in something together — whether it's a marriage, a long-term relationship, or a business partnership. Sometimes these heart-to-hearts are dreamy and hopeful, and other times they are more pragmatic.
Though it's not an exceptionally comfortable subject, you might have to ask yourselves this question: what would happen if one of us were to pass away?
When shopping for life insurance as a couple, you have the choice of purchasing individual life insurance policies or a joint life insurance policy. Though most opt for the former, those who choose joint life insurance have two options: first-to-die or survivorship life insurance.
What is Survivorship Life Insurance?
Some insurers offer survivorship life insurance as a term policy, but it is more commonly purchased as permanent life insurance. Survivorship life insurance is a type of life insurance that covers two people with one death benefit.
When you apply for a survivorship life insurance policy, you and your partner will both go through the underwriting process.
The underwriter at your insurance company will review your application and investigate each person's health status, medical records, lifestyle, and connection to one another. If approved, you and your co-applicant can purchase a survivorship life insurance policy, choose a coverage amount, and name your beneficiaries.
How Does a Survivorship Life Insurance Policy Work?
Survivorship life insurance is also called second-to-die life insurance because the death benefit is paid out only after both policyholders have passed away.
No insurance benefit is paid out when the first person dies on a survivorship life insurance policy. Instead, the policy stays in force as long as the surviving insured continues to make premium payments.
When the second insured dies, the death benefit then goes to the policy's named beneficiaries.
What is First-to-die Life Insurance?
Most people purchase life insurance to help provide a little financial protection for their loved ones. Since the death benefit of a survivorship life insurance policy is not paid out when the first insured dies, it may not be the right fit for some people.
Like survivorship life insurance, first-to-die life insurance is typically sold as a permanent joint policy. As the name alludes, a first-to-die policy pays out the death benefit when the first of the two insured passes away.
Is Survivorship Life Insurance the Right Type of Life Insurance for You?
Survivorship life insurance might be a good option for you if you:
- Want to leave a legacy donation: You can name an entity as your life insurance beneficiary. When both of you have passed, the death benefit of your survivorship policy would then go to your selected charitable organization.
- Have a permanent dependent: Some children need lifelong care. While a surviving parent may be able to take care of an adult dependent solo, what happens when both parents pass away? The death benefit of a survivorship policy could be used to pay for the special care your child may need when you are gone.
- Want to leave something behind for your heirs: When you and your spouse or domestic partner are gone, you can leave a little financial benefit for your loved ones. In most cases, the death benefit on a life insurance policy is tax-free for those who receive it.
- Are looking for a joint policy with living benefits: Some survivorship life insurance policies feature a cash value component. Though the death benefit on your survivorship policy is not available until both insured dies, you may be able to build cash value on your policy over time.
Accrued cash value on a life insurance policy can be used to pay the policy's premium, make withdrawals, or take out a life insurance loan.
Survivorship Life Insurance Costs
One joint survivorship life insurance policy is generally going to be less expensive than purchasing two separate permanent life insurance policies.
With a survivorship policy, you're paying for one death benefit to cover two people, so it makes sense that it would cost less than two individual permanent policies, each with its own death benefit.
Is Survivorship Life Insurance Worth It?
The worthiness of a product is subjective. If you're considering survivorship life insurance but unsure if it's the right choice for you and your loved ones, you might want to ping your insurance agent and see what they think is the best option for your particular situation.
Survivorship life insurance isn't a commonly purchased type of life insurance, likely because it leaves the surviving insured without any financial benefit when the first insured passes away. For most people, that doesn't make sense because they are likely concerned about the loss of income their death could cause a partner and their dependents.
Alternatives to Buying a Survivorship Life Insurance Policy
A survivorship life insurance policy could be a good fit for couples who aren’t looking for a financial safety net for the surviving partner, but if you are specifically considering life insurance to provide a death benefit to your partner when you die, you might want to explore these alternative types of life insurance:
- First-to-die Joint Life Insurance: As previously mentioned, this type of life insurance policy also covers two people with one death benefit. The death benefit on a first-to-die policy is paid out when the first insured passes away.
- Whole Life Insurance: Whole life is individual permanent life insurance that offers a death benefit and an opportunity to build cash value on the policy while you are alive. The death benefit on whole life policies is paid out to your beneficiaries when you pass away.
- Term Life Insurance: Term life insurance offers straightforward coverage for a period of time, typically ten to thirty years. Once a term life insurance policy is approved, you can select your term, coverage amount, and beneficiaries. If you die with the policy in force, your beneficiaries receive the policy's death benefit.
Because term life insurance policies have an expiration date and do not build cash value, they are less expensive than permanent life insurance policies of the same coverage amount.
Bestow Makes Term Life Insurance Easy
You likely came here to learn about survivorship life insurance but if you're curious about term life insurance, check this out: with Bestow, you can apply for no-medical examterm life insurance online right from your laptop or phone.
No medical exam, no lab tests, and no excruciatingly long waiting period. Instead, you fill out an application, answer a few pages of health and lifestyle questions, click submit, and boom, you just applied for term life insurance.
Start with an instant quote and, if approved, purchase your policy to lock in your premium for the entirety of your policy’s term.
- Survivorship life insurance is a type of joint life insurance policy covering two people with one death benefit.
- Sometimes referred to as second-to-die life insurance, survivorship life insurance provides a death benefit to beneficiaries when the second insured passes away.
- Though it is not a commonly purchased type of life insurance, a survivorship life insurance policy might be a viable option if you and your partner are looking to leave behind a legacy donation or inheritance.