“Joint life second death” life insurance, also known as “second-to-die” or “survivorship” life insurance, is a type of policy that covers two individuals, typically partners or spouses. Unlike the joint life first death policy, this policy only pays out upon the death of the second insured individual.
Here’s a breakdown:
Joint Life
This refers to the fact that the policy covers two lives, usually partners or spouses.
Second Death
The policy pays out only after both insured individuals have passed away.
The primary purpose of this type of insurance is different from the first death policy.
Here are some common reasons for taking out a joint life second death policy:
Estate Planning
This policy can be used to cover inheritance tax liabilities. In the UK, when the first partner dies, any assets passed to the surviving spouse or civil partner are typically exempt from inheritance tax. However, when the second partner dies, there might be a significant inheritance tax bill. The payout from the policy (which would be written in trust) can be used to cover this tax, ensuring that heirs receive the maximum possible inheritance.
Protecting Dependants
If there are dependants who will still need financial support after both partners have passed away, such as a child with special needs, this policy can provide the necessary funds.
Business Planning
Business partners might take out this type of policy to ensure the continuity of the business after both partners have passed away.
It’s essential to note that the premiums for joint life second death policies will be lower than having two separate life insurance policies because the insurer is only paying out once, after both insured individuals have died.
The default option when applying for any type of joint life cover is “joint life first death“. To change this you would need to notify the insurer when you apply. We would recommend that this only happens once you have received professional advice.
