Customers have a variety of insurance policies to choose from. One type of insurance policy that couples may wish to obtain is a second to die insurance policy. Second to die life insurance includes characteristics of joint life insurance and whole life insurance. Second to die life insurance is also known as last survivor life insurance.
Whole Life Insurance
Whole life insurance provides insurance coverage until the person insured under the policy dies. With second to die policies, coverage is provided until the last person dies. Under a whole life insurance policy, the person insured will pay a level premium their entire life. A level premium is an insurance premium that does not increase as the person insured under the policy ages. Second to die policy premiums are level premiums.
Joint Life Insurance
A second to die policy is a type of joint life insurance. Joint life insurance is very similar to whole life insurance. The only difference between joint life insurance and whole life insurance is that joint life insurance insures two people under one policy while whole life insurance insures only one life under one policy.
Second to Die Insurance
Second to die insurance includes the benefits of whole life insurance, and because it covers two lives, it is joint life insurance. When both people who are insured under the policy die, the policy benefit is paid.
Second to die insurance offers the opportunity for a married couple to obtain insurance at a lower cost than if they purchased two individual whole life insurance policies or a joint life insurance policy. This policy was created for married couples who want to use the benefit of the policy to pay estate taxes that would come due after they both died.
Since a second to die policy will not pay a death benefit until the both people insured under the policy die, this policy is not a good choice for people who wish to provide money to pay for their funeral expenses. While the policy benefits could be used to pay the funeral expenses of the last person to die, the problem is that when the first insured person dies, the policy benefits will not be paid out and thus there will be no insurance benefit to help cover funeral expenses of the first person who died. This should be considered before a person chooses to buy a second to die life insurance policy.
- “Principles of Insurance: Life, Health and Annuities”; Harriet E. Jones; 2005
- Lydia Boyko; Professor; Seneca College, Toronto, Ontario
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