It’s true that not everyone owns a life insurance policy, including the people who may need it most. However, according to LIMRA’s 2017 Life Insurance Barometer study, most working adults know they should participate in a plan to protect against unforeseen circumstances. This trend has been relatively constant for many years.
One major reason why people neglect participation in a life insurance plan may be a misunderstanding about the various options available to them. While advisors and brokers make it their livelihood to understand and remain aware of all the life insurance products their clients may benefit from, potential or even current clients may not be. Survivorship plans are one life insurance option that many consumers may not be aware of.
As Insurance News Net explained, survivorship life insurance works well as a tool for estate planning, but also has utility in a few other unique situations. Survivorship life insurance plans insure two people, typically a married couple or business partners, and does not pay out the death benefit to beneficiaries until the last surviving owner passes away.
Estate planning for families
In terms of estate planning for families, a survivorship policy carries some distinct advantages over a traditional plan. For one, it can make the entire process of estate distribution much faster and easier for everyone involved. As law writer Kyle Krull noted, a survivorship insurance policy can be used to provide liquidity to an illiquid estate. For example, a family estate may include a business or property that is extremely difficult to physically divvy up fairly between heirs. With the use of a survivorship plan, liquidity is quickly created at the moment of the owner’s death, eliminating one of the most time-consuming and emotionally difficult steps in the estate planning process.
Estate taxes can be a major drain on inheritance and family fortunes. Thankfully, with a well-designed plan that includes a survivorship policy, the burden of taxation can be distributed easily and much more reasonably.
Survivorship policies aren’t widely understood or well-known, but they can be great tools for families in need of a safe, long-term asset that can make estate planning easier.