What Does Variable Survivorship Life Insurance Mean?
A variable survivorship life insurance policy denotes a policy that provides life cover to two individuals. Thereafter, it pays a death benefit only after both the individuals have died. It does not pay any benefits in the event of the death of any one of the two individuals covered.
Variable survivorship life 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 has a cash value component where the insurer sets aside a portion of each premium payment for the policyholder to invest from various investment options provided by the insurer.
Typically, this policy has been a very popular estate conservation tool for couples looking to protect their legacy from considerable estate taxes. The heirs typically use the death benefit for paying federal estate taxes and other estate-settlement expenses once both the individuals covered in the policy pass away.
It is worth noting that the provisions of the federal tax law enable an individual to leave an unlimited amount of assets to the surviving spouse. Therefore, if an individual dies after bequeathing all material possessions to the spouse, the surviving spouse will not need to pay any federal estate taxes at the time. However, once the surviving spouse dies, these material possessions will become a part of the estate – assuming that the surviving spouse does not remarry. In this scenario, the heirs will use the death benefit for paying the taxes due. These policies are quite inexpensive per thousand dollars of death benefits as opposed to traditional life insurance policies.