It has become really easy to turn around when looking for the right fit for you because of the numerous types of life insurance we have these days. This goes along with the benefit of having multiple options, comes the responsibility of researching which type will be a match for your current situation. You might have come in contact with survivorship life insurance policies if you have been searching for a very long time and you might also be confused on what it really means. The advantages and disadvantages of a survivorship policy is discussed in this article in order to help you decide if it is right for you and your loved ones.
What is Survivorship Insurance?
An insurance that works in a way that only makes the benefit collectible in the event of the death of both participants on the same policy is known as survivorship life insurance. The benefit is not released when one of the partnered insured’s passes. The policy can only be released to the beneficiaries when both of the policyholders pass. The beneficiaries in this case would not be the partnered insured (or spouse in many cases) since there will be no benefit until after both parties are gone.
Who would benefit from this type of insurance?
Typically, someone would opt for this type of insurance if the partnered couple has no immediate need for the insurance in the case of the passing of one or the other. This type of policy is typically left for children or other dependents with the intention that if one parent was still alive they would be able to provide for the family. This insurance is typically only to cover needs if something happened to both.
People will also use survivorship insurance to leave an inheritance to beneficiaries as a way to leave a legacy and wealth for their loved ones. This is a policy that can be strategized to leave larger amounts that will not be used by either partner or spouse before it is passed on.
A policy like this can make it more accessible to get insurance for that harder to insure the person if one spouse or partner is hard to insure. It makes it less risky for the insurance company when you have the built-in factor of a second person’s passing. The cost of survivorship insurance is lower than some of the other available options and this makes it more appealing in certain circumstances where cost is a prohibiting factor.
What are some of the downsides to be aware of?
With this type of insurance, while there are reasons some would benefit from this setup, there are also very obvious and serious downsides. If the income or savings of either spouse would not be sufficient to live on and sustain without the other (and any dependents they may have), this policy would not offer any help in replacing funds after one partner’s death. The surviving partner would receive no benefit at the time of their partner’s death and would have to rely on other funds or income. If funds are needed to pay for essentials or the lifestyle a family was accustomed to, this insurance policy will fall short on providing for the needs of the surviving partner.
One of the highly personal decisions to make based on not only emotional components is picking a life insurance policy. It requires risk, lifestyle and situational needs consideration. As you advance in age, it is imperative for your life insurance policy to change you should reach out to a trusted broker or professional to take a look at your options if survivorship insurance sounds like a nice idea to you. Take time to care for your family’ future now.