Couples looking for life insurance often purchase two separate policies and make each other beneficiaries. However, a single life insurance policy that covers both individuals might better fit some couples’ needs.

Joint life insurance policies offer an affordable alternative to individual life insurance that preserves financial support for the people you care about after you’re gone. Survivorship life insurance is a joint policy that pays out when both insured parties have passed away. Beneficiaries of a survivorship life insurance policy could include your children, business, or even a charity.

What is survivorship life insurance and how does it work?

Typically, survivorship life insurance and other joint policies are permanent. They last through the end of the policyholder’s life or lives and accrue cash value over time. You generally won’t find joint coverage for a set term, as most joint life insurance needs are permanent.

You can choose from two types of joint life insurance. “First-to-die” insurance pays the death benefit when the first of the two policyholders passes away. Typically, the surviving partner receives the payout to help cover ongoing household expenses.

Survivorship or “second-to-die” policies don’t pay the death benefit until both insured people die. Of course, that means neither party can be beneficiary; instead, survivorship policies typically leave a legacy for the future. While surviving partners can’t receive the death benefit from a survivorship policy, its cash value still offers a financial safety net during their lives.

Survivorship policies are usually a relatively affordable choice for permanent coverage because they cost the insurer much less than two separate policies would. Therefore, survivorship policies could be a lower-cost option for people whose children or other loved ones will rely on their income indefinitely or need intensive long-term care.

Who can be covered by a survivorship life policy?

Married couples or long-term partners may take out survivorship life policies to support their children or other family members once both policyholders pass away. However, any two people can purchase a survivorship life policy together if it serves their financial interests.

Siblings, for example, may choose a survivorship policy to provide for younger family members or aging parents if both people pass away. Alternatively, business co-owners may choose survivorship life insurance to protect their professional assets. If you and another person determine that survivorship life insurance fits your budget and situation, you could apply for a policy together and will need to prove insurable interest.

What are the benefits of survivorship life insurance?

A survivorship life insurance policy could lay the groundwork for people, businesses, or organizations you care about to thrive in their financial futures. Survivorship life insurance could be a beneficial tool for doing the following:

Assist with estate planning

Some wealthy couples might take out survivorship life insurance to make estate planning smoother. Because spouses can leave assets to each other tax-free, loved ones won’t be responsible for paying taxes until the surviving spouse passes away.

That’s where second-to-die life insurance can help beneficiaries cover the cost. Because life insurance benefits are paid directly to beneficiaries and not considered part of the estate, loved ones can have quick access to funds to cover administrative costs or taxes without needing to sell off the assets they’re inheriting to do so.

Support a special-needs dependent

If your child, another family member, or any loved one will rely on you and your partner indefinitely for care, a survivorship insurance policy could help you provide them with ongoing support when you’re gone. Depending on your situation, you may name the dependent as a beneficiary or put the money in a specific trust dedicated to paying for their care.

Aid in business succession

Two business partners may want a survivorship life insurance policy to make transferring their business easier when both partners pass away. If you and your business partner already know who will take over the company after you—whether it’s a family business or not—you may choose to designate that person as the policy’s beneficiary. Then, the funds they receive could help them transition into the role. Otherwise, the policy could provide enough liquidity to transfer business ownership in another way.

Offer a path to charitable giving

If you and a partner, family member, or friend share a passion for a cause or cherish the contributions of a specific organization, a survivorship policy could be a great way to give back. Your beneficiary doesn’t have to be an individual; you could leave your death benefit to a non-profit of your choosing. With a life insurance policy, you could give a substantial amount of money to an organization whose work you value and have a lasting impact even after you’re gone.

Is a second-to-die policy right for you?

A survivorship life insurance policy could meet your life insurance needs if your priority is planning for the future after both parties have passed away. Whether you’re a business owner who wants to help your company achieve future success or a parent who hopes to provide your child with ongoing support, you might consider a survivorship policy. Contact a licensed life insurance agent today to discuss joint policies and other life insurance options.

FAQs about survivorship life insurance

How many lives does a survivorship life insurance policy usually cover?

A survivorship life insurance policy is a joint policy, meaning it covers two lives.

How are survivorship life insurance policies helpful in estate planning?

Survivorship life insurance policies are helpful in estate planning because the death benefit could either act as an inheritance itself or cover estate taxes, alleviating the burden for beneficiaries.

What is first-to-die life insurance vs. second-to-die?

First-to-die life insurance is a type of joint policy that pays out a death benefit to the surviving partner when the other party passes away. Second-to-die life insurance, also called survivorship insurance, is a joint policy that doesn’t pay out until both parties pass away.

Who should own a second-to-die insurance policy?

A second-to-die life insurance policy could be a good fit for people with children or other loved ones who will depend on them indefinitely, for two people who share ownership of a business, or for couples who may not be able to afford two individual policies.