Last-Survivor Life Insurance

 

What Is Last-Survivor Life Insurance?

Last-survivor or second-to-die life insurance covers two lives under one policy. The death benefit is paid after the second person covered under the policy dies. Generally, premiums continue to be paid after the first insured dies. However, this type of policy may feature less expensive premiums than two individual policies, allowing the policy owner(s) the potential to buy a policy with a larger death benefit than might otherwise be affordable using separate policies.

Last-survivor life insurance may serve several purposes. For instance, last-survivor life insurance can be used to increase the inheritance for the beneficiaries of a married couple with an otherwise modest estate. Or, this type of insurance can be used to preserve an existing estate by providing cash for estate settlement costs and taxes. A last-survivor policy can be used to protect a two-income family when the loss of one income may be tolerable but the loss of both incomes would leave dependents without financial support.

Last-survivor life insurance may be used for funding the estate taxes of wealthy couples whose estate plans make maximum use of the estate tax deferral at the first death. In this situation, there may be a likelihood of greater taxes due at the death of the surviving spouse than when the first spouse dies. The last-survivor policy can be used to provide cash for the taxes due at that time.

A person who is in poor health may not be able to obtain an individual life insurance policy. However, insurance companies often issue last-survivor policies even when one of the insureds in poor health (presuming the other insured is in better health) because only one death benefit is paid and not until the last insured person dies.

On the other hand, there may be some tradeoffs to last-survivor life insurance. Since the death benefit doesn't pay until the death of the second insured, it is possible that the surviving insured could be left without sufficient financial resources. And since premium payments must continue to be made, the surviving insured may not have the money available to pay the ongoing premiums. Some policies consider the insurance paid up at the first death so no additional premium payments are needed following the death of the first insured. Check for these features on any last-survivor life insurance policy you are considering.

The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased. Before implementing a strategy involving life insurance, it would be prudent to make sure that you are insurable. As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies commonly have contract limitations, fees, and charges, which can include mortality and expense charges. Any guarantees are contingent on the financial strength and claims-paying ability of the issuing insurance company.

 
The information in this newsletter is not intended as tax, legal, investment, or retirement advice or recommendations, and it may not be relied on for the ­purpose of ­avoiding any ­federal tax penalties. You are encouraged to seek guidance from an independent tax or legal professional. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the ­purchase or sale of any security. This material was written and prepared by Broadridge Advisor Solutions. © 2025 Broadridge Financial Solutions, Inc.