Variable Survivorship Life Insurance
What Does Variable Survivorship Life Insurance Mean?
A variable survivorship life insurance policy is one that provides life coverage for two individuals. It pays a death benefit only after both individuals have passed away. No benefits are paid in the event of the death of just one of the individuals covered.
This type of insurance may also be referred to as survivorship variable life insurance or last-survivor life insurance.
Insuranceopedia Explains Variable Survivorship Life Insurance
Ideally designed for couples, variable survivorship life insurance includes a cash value component, where the insurer allocates a portion of each premium payment for the policyholder to invest in various investment options provided by the insurer.
This policy is commonly used as an estate conservation tool for couples seeking to protect their legacy from significant estate taxes. The heirs typically use the death benefit to cover federal estate taxes and other estate-settlement expenses once both individuals covered by the policy have passed away.
It is important to note that federal tax law allows an individual to leave an unlimited amount of assets to a surviving spouse. Therefore, if an individual passes away after bequeathing all material possessions to their spouse, the surviving spouse will not need to pay federal estate taxes at that time. However, once the surviving spouse passes away, these assets will become part of the estate—unless the surviving spouse remarries. In this case, the heirs will use the death benefit to cover the taxes due. These policies are relatively inexpensive per thousand dollars of death benefits compared to traditional life insurance policies.
