Why is a combination of first-to-die insurance and survivorship life insurance considered a wise choice?


Combining first-to-die insurance with survivorship life insurance is a cost-effective way of estate planning, especially when both spouses are career people. The first-to-die/survivorship life combination is considered a better option than buying two separate life policies.

In families where both the husband and wife work, have roughly the same income, and are planning to provide benefits for their children, such as money for education, the premature death of each of the breadwinners may have a financially devastating effect on the family, unless they are adequately insured. After the first spouse dies, the marital deduction will come into play to defer the estate tax until the second death.

Therefore, more coverage will be needed after the death of the second spouse to pay the estate tax. A combination of a first-to-die policy with certain coverage and a survivorship life policy with double or triple the first-to-die policy face amount will cater for the family's need upon both the first and the second death.

Characteristics of First-To-Die Insurance

First-to-die insurance, also called joint life (JL), is coverage typically used in families who rely on two incomes, to replace income at the first spouse's death. If one of the spouses dies prematurely, regardless of whether it is the wife or the husband, the proceeds of JL insurance can be used for meeting certain financial goals such as paying off a mortgage, funding the children's education, etc.

First-to-die insurance is offered in the form of permanent or term insurance, or additional insured riders to individual life insurance policies.

Survivorship Life

Survivorship life is a second-to-die life policy, or a combination of policies, which pays off the face amount when the last of the insureds dies. Although its application is not restricted to family estate planning, it is typically used to insure the lives of the wife and the husband.

Survivorship life insurance provides liquidity when the second spouse in a family dies, and in case a large federal estate tax is due. Insurers offer permanent and term survivorship life policies.

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