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Survivorship Life Insurance

Survivorship life insurance actually goes by many names, including “Second to die” or even “Joint” insurance. Whatever it happens to be called, this variety of life insurance is designed to help pay estate taxes for couples with larger assets. Estate taxes can be particularly brutal for families trying to pass along a family business to the second generation. One of the top causes for businesses not making it to the next generation is estate taxes and survivorship life insurance can be a very useful tool in helping to ensure that the company continues to exist past the death of its founder(s).

A very unique aspect of survivorship life insurance is the fact that it does not pay out to any beneficiaries until both original policy holders die. Even in the event of one spouse (or policy holder) passing, the survivorship coverage would not be paid to any beneficiary until the death of the second partner. This variety of insurance is not available on term policies but can be purchases as part of a while or universal policy.


Some of the primary advantages to purchasing a survivorship or joint life insurance policy are:

  • Typically costs less than buying two separate life insurance policies
  • Cash component of policy can continue to grow tax-free until redeemed
  • Can help pay estate taxes

Cash Value

Like any whole or universal life insurance policy, there is a cash component to a joint or survivorship policy. Part of the premium is applied towards the actual life insurance with the rest being put towards a portfolio of some kind.


The cash value of a whole or universal life insurance policy is not subject to taxation until the policy is cancelled or exercised. Even then, no taxes are due unless the final cash value exceeds what was initially invested into the insurance investment portfolio. Typically, the cash value continues to grow and some taxes are due when the policy is cashed in and then the appropriate capital gains taxes are paid.

Preserving net worth is very difficult to do for anyone when estate taxes are a concern. In order to prepare the next generation for this financial burden, an estate planner or attorney can help use a survivorship life insurance policy to prepare for the inevitable estate taxes. Ownership of a joint life insurance can be effectively transferred to a third party or set up as a trust for the surviving beneficiaries.

With effective planning, a survivorship life insurance policy can thus be set-up so that what the beneficiaries receive is not part of the estate or subject to those excessive tax rates—plus, the proceeds from the policy would not be considered income (except for the cash value amount if the original investment was exceeded by the final cash value of the policy). Thus, the survivorship life insurance policy could be used to pay estate taxes and thus preserve a family business for the next generation.

Other Uses for Survivorship Life Insurance

Survivorship life insurance policies are sometimes purchased by parents with children with special needs. Such children will require a great deal of care and financial security to survive once both parents have passed. Survivorship is a great tool that parents can use to prepare their estate so that the child will have all the financial resources necessary to live and be cared for in the future.

Whether you are trying to preserve a family business for the next generation or simply attempting to ensure that your child with special needs is financially secure in the years ahead, a survivorship life insurance is the option for you. An estate planner or financial advisor can best help you use a survivorship policy to help ensure that your beneficiaries are not robbed of their heritage by estate taxes!

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