Solutions for Spouses

The Benefits of Survivorship Life Insurance

In February, we celebrate Valentine’s Day, a holiday created exclusively for couples.  Before the month comes to an end, we want to take this opportunity to talk about the cost savings available to partners when considering life insurance options.  In general, married couples have more flexibility than single people because they have twice the estate tax exemption limit and the ability to transfer all assets to a surviving spouse under the unlimited marital transfer.  This does not eliminate the estate tax, but it can postpone it until the second death occurs. 

Survivorship (also called second-to-die) life insurance can offer substantial premium savings if the death benefit is not needed until both spouses have passed away.  As demonstrated in the graphic below, fewer premium dollars are paid into the survivorship policy than into the single life policy with the same death benefit, premium paying duration, guaranteed death benefit duration, product, and illustrated interest rate. 

The savings are further demonstrated when looking at the internal rate of return (IRR) at life expectancy (LE) for each option.  Specific to life insurance, the IRR compares the cumulative premiums against the death benefit obtained in a hypothetical future year and is used to demonstrate the return on investment of a policy.  The IRR’s in the graphic are at LE, which is 39 years for this couple.  If mortality occurs before the expected LE, the IRR would be higher.

Survivorship life insurance can be a smart consideration for couples who are completing their financial planning.  Contact us with any questions or opportunities to help your clients achieve their goals.  This is what we enjoy doing for only a select number of families, businesses, and charitable institutions each year, and we look forward to hearing from you.