Survivorship
Life Insurance
What
is it?
Survivorship
Life is a second-to-die life insurance policy. (USLIP)
Second-to-die
coverage is for two persons (usually husband and wife).
The death benefit of a second-to-die policy is not payable
until both people covered by the policy die.
Second-to-die
coverage is used primarily in estate planning. It protects
children and other heirs from the burden of estate taxes,
which often become due and payable nine months after the
date of the second insured's death.
Tax
advisers and estate planners routinely recommend second-to-die
coverage as a way to pay estate taxes and other costs associated
with settling a large estate.
Interest
sensitivity and cash value build-up
Premiums
paid into your Survivorship Life policy will earn interest
at a competitive rate, guaranteed never to be less than
3%. Your policy can develop available cash value, which
can be used by you for other purposes, if needed.
Premium
flexibility
Subject
to the initial minimum premium requirements described in
the policy, you can pay whatever premium you wish. Any premium
you pay over and above the minimum can result in an even
larger build-up of the policy's cash value, or enable you
to reduce future premiums.
Disability
of premium waiver
This
rider to your Survivorship Life policy can waive the policy's
monthly deduction in the event of disability. It can cover
one or both insureds. (USLIPDW)
Coverage
flexibility
The
amount of protection in your Survivorship Life policy can
be increased at any time, subject to the insurability of
the two insureds. Additional premium may or may not be necessary.
A reduction in the policy's amount of coverage can occur,
once the policy develops a positive surrender value.
Proceeds
from a life insurance policy paid because of death of the
insured are generally excludable from the beneficiary's
gross income for tax purposes.
Riders
Automatic
Increase Rider. Your estate is likely to grow in value.
When it does, your need for additional coverage will grow
as well. By including the Automatic Increase Rider with
your policy, your coverage can automatically increase every
year and eventually grow to as much as twice the original
amount of coverage. (Form USAIR)
Contemplation
of Death Rider. Maybe your estate plans are not complete,
but you're in the process of finalizing them. This special
optional rider enables you to get the necessary coverage
in place now, including some important additional
temporary protection. (Form USLIPCD)
Proceeds
from an insurance policy paid because of the death of an
insured are generally excludable from the beneficiary's
gross income for tax purposes. (IRC Sec. 101(a)(1).)
Income
and growth on accumulated cash values have been held by
the Tax Court to be generally taxable only upon withdrawal.
(IRC Sec. 72.). Consult your tax adivser or attorney on
your specific situation.
Policy
death proceeds can be arranged to be tax-free (IRC Sect.
2042)
