Survivorship life insurance is a form of term life insurance by which two people are insurd and the death benefit is paid out at the death of the second. Another way in which it is referred to is “second-to-die life insurance”. It is often abbreviates as SWL meaning survivor whole life or SUL for survivor universal life.

Advantages of this type of coverage

It is usually possible to get this policy with a lower premium since it does not pay until the second death.

Another factor is that even if one of the insured has health problems, a standard issue policy is still available. Or if one of the insured is not insurable, an extra premium may be added.

Here are five ways that a survivorship term life insurance policy can be used:

To Pay Off Estate Taxes

The least expensive way for providing funds for the payment of estate tax is through the use of term life insurance. The tax law allows the surviving spouse to receive all of the property death tax free. This is referred to as the "unlimited marital deduction." This means that any possible estate tax that may be due, need not be paid out until the death of the second spouse.

To meet this need, the term life insurance companies designed this form of insurance policy. The lower premium makes it a better sol than that of insuring only one person.

Replacing an Asset That Has Been Given Away

When you use a charitable remainder trusts (CRTs) you are permitted to sell a highly appreciated asset (such as stock, land, or a business etc.) without having to pay a capital gain tax. You also can receive an income tax deduction and in this way convert the asset to income. At the time of death, the asset then passes to the charity, rather than to the heirs.

To cover the fact that the children are not receiving the asset, you can insure the two spouses for an amount equal to the value the otherwise lost asset. It is also possible to pay the premiums of such a policy entirely with income from the charitable remainder trust, which may in fact be found money in the case where the original asset was illiquid. You can spread the income tax deduction over a period of six years if the asset contributed to the CRT is sufficiently large. This can become another source of premium.

How to Even Out One’s Inheritance

Take the example of a couple with three children and a small family business. While one of the children is involved in the business, the other two have their own careers. Now if the largest part of the estate is the business, then two of the children will be left out of the inheritance.

A second-to-die policy on the two spouses will have the effect of evening things out. Took for example, a total estate that is worth $6 million while the business represents $4 million of that. The parents can overcome the loss two the two other children with a 6 million dollar survivorship life policy. This gives the other survivors those same as the one receiving the business.