Life insurance industry trends show that an old favorite – survivorship life insurance, an insurance policy that insures the lives of two people instead of just one – is making a comeback. While it is not for everyone, it can certainly prove beneficial to those for whom it applies.

Why Insure two People for the Price of One

This type of policy can be advantageous because it serves as a way for people to get assets out of an estate so heirs pay less estate tax on inheritance.  Survivorship life insurance is best suited as a part of an estate plan for wealthier couples who expect that substantial estate taxes will be assessed at the death of the second spouse.  Since estate tax usually does not apply if assets are left to a spouse or a charitable organization, the insurance that is paid upon the death of the second spouse will cover the tax obligations.

This type of insurance is also advantageous when the major family asset is a valuable business or real estate; assets that aren’t liquid, which the survivors may not want to sell.  Estate tax is still assessed on property and all illiquid assets, so a heavy burden can be left on heirs, unless otherwise planned for with a tool such as this.

Additionally, with survivorship life insurance the monthly premium is reduced as compared to insuring two lives under separate policies.  Even as wealthier couples enter the later stages of retirement, insurance premiums can become a burden.

Who Qualifies and Who Doesn’t

The ideal candidate is a person who has a net worth above $5 million, has an illiquid estate and fully understands the benefits of gifting.

Because estate tax is only instituted on estates worth $2 million or more, those of moderate net worth will not serve to benefit from this type of policy.  However, keep in mind that people with a net worth of $2 to $3 million might not be good candidates today, but they might be in the future.

The Estate Tax Debate

Even though the estate tax has been in flux for the last six or seven years, President Barack Obama believes that repealing the estate tax would cause too great a loss in tax revenue, $522 billion over the next decade according to the Treasury Department.

As people begin to accept that estate tax is here to stay, as people continue to amass wealth at a younger age and as estate plans become gradually more more complicated, survivorship life insurance is going to win back some of the popularity it once had as a tool for advisors to utilize when creating their client’s estate plan.

Adam Sherman is president and CEO of Firstrust Financial Resources in Philadelphia Pa and counts 23 years of experience in the financial services field.  He is a member of the Society of Financial Service Professionals, National Association of Insurance and Financial Advisors, Financial Planning Association and Association of Advanced Life Underwriters. For more information visit, www.firstrustfinancialresources.com