Second-to-Die Insurance
What it is:
Second-to-die insurance is a type of life insurance which grants a death benefit only once the second insured party has died.
How it works/Example:
Also called survivorship insurance, second-to-die insurance is a life insurance policy which covers the lives of two individuals, usually married couples. The terms of a second-to-die policy stipulate that the associated death benefit is not executed until the second individual covered under the policy has died. Once both parties are deceased, the death benefit is granted to the beneficiary or beneficiaries designated in the policy.
Why it matters:
Second-to-die insurance is frequently used by married couples in estate planning with the intention of protecting heirs from the burdens of inheritance taxes. In this respect, the benefit of second-to-die insurance is that the death benefit may be used to help offset inheritance taxes once the last parent has died.