SPPO Provides a Spouse with Life Insurance Opportunities for Tomorrow
The Spouse's Paid-Up Insurance Purchase Option (SPPO)1 rider is a "no cost" rider automatically included with most life insurance policies2offered by New York Life and its subsidiaries. SPPO gives the spouse of the insured, if a beneficiary, the guaranteed right to purchase a new single premium paid-up life insurance policy on his or her own life, without evidence of insurability, and within 90 days3of the insured's death.
This means that if the surviving spouse has a life insurance need after the insured's death, that spouse can use all or part of the proceeds from the insured's policy to purchase paid-up life insurance coverage on himself or herself. If the spouse is either uninsurable or a high insurance risk because of a medical condition or injury, SPPO can provide coverage that he or she would not be able to otherwise obtain at an affordable cost or even at all.
SPPO Offers Many Advantages
This rider provides a wide range of benefits: The security and protection the SPPO rider provides is automatically included with most single life policies at no additional charge. The rider gives the surviving spouse the ability to "wait and see" a second chance to re-examine estate tax liability and purchase additional life insurance, if needed. SPPO protects a spouse's insurability, enabling him or her to still obtain coverage even if health status makes him or her uninsurable, or insurable only at a high premium. SPPO can be an effective estate conservation tool by helping to protect beneficiaries and provide funds to pay estate taxes after both individuals die. (It may also be valuable in helping small business owners meet future estate tax expenses.) If both the insured and his or her spouse die at the same time or within 90 days of one another, the Company will assume that the SPPO rider would have been utilized by that spouse, and will pay additional life insurance proceeds to the beneficiaries.
The New Policy
The surviving spouse must use the SPPO rider within 90 days after the insured's death. The face amount of the new paid-up life insurance policy can be equal to or less than the face amount of the original policy (plus any additional coverage from policy riders or available dividends).4
The new paid-up life insurance policy has cash value and loan value. Currently, interest on the cash value is compounded each year at 4.0%. This means the spouse's policy will accumulate cash value tax-deferred, and he or she can borrow on that value, if needed.
The single premium for the new paid-up life insurance policy is based entirely on the spouse's sex and age on the date the new life insurance takes effect not on his or her health.
The spouse may apply part of the original policy proceeds to purchase the new paid-up life insurance policy. Any remaining money can provide funds to cover expenses from the first death, and to supplement income.
SPPO in Action
The SPPO rider enables a married couple to defer the decision about the need for additional coverage to a future time regardless of the spouse's future insurability. The following example shows how the SPPO rider can help provide additional funds to a married couple's beneficiaries.
SPPO's Safety Net Provides Additional Proceeds During a Difficult Time
SPPO also features a safety net known as the "Common Disaster Clause." If the insured's spouse dies at the same time as the insured (or within 90 days after the insured's death, and before the paid-up life insurance policy is purchased), the Company will assume that the SPPO rider would have been exercised. We will pay the initial death benefit plus the maximum amount of paid-up life insurance that would have been available (less the applicable single premium) to the spouse's estate. And, if both the insured and the insured's spouse have policies with the SPPO rider, the rider will be activated for both individuals providing beneficiaries with the additional proceeds they'll need at a difficult time.
Third Party Election Endorsement
If a third party (such as a trust) is the owner-beneficiary of the original policy, this third party has the right to purchase the paid-up life insurance policy on the life of the surviving spouse provided that it has necessary "insurable interest," and the spouse's consent. This frequently occurs when an irrevocable life insurance trust is the owner-beneficiary of the policy as part of a couple's estate conservation strategy.
Contact Your New York Life Agent
Want to know more about the SPPO rider? Your New York Life agent can provide additional information on how SPPO can be of use to you, and about other riders available with New York Life and its subsidiaries' policies. To contact a local New York Life agent today for more details click on the talk to us
2 SPPO is not available with Survivorship Whole Life, Survivorship Variable Universal Life, or with any policy that contains the Survivor Purchase Option rider.
3 Thirty-one days in South Carolina.
4 This amount does not include accidental death benefits or any unpaid loan balance. The new paid-up life insurance policy is not eligible for any riders.