What is a survivorship life policy?


Survivorship life insurance is a type of joint life insurance—one policy covers two individuals (usually spouses) and pays the benefit only after both have passed. 

Couple talking to agent while sitting at desk.

A survivorship policy is a type of joint life insurance

Survivorship life policies have many of the same characteristics and benefits of individual life insurance. The main difference is that they cover two people, instead of one. Generally, they are whole life policies, but they can also be universal life, or sometimes even another form of life insurance. As with individual policies, the life insurance benefit paid to your beneficiary is distributed generally free of federal income taxes.

So, when should you consider a joint policy like survivorship life? Well, that can be complicated. In most cases, individual whole life policies on both parties will be a better solution. Why? Because with a survivorship policy, when one of the insured dies, no benefit is paid. That means end-of-life expenses like funeral costs and medical bills will have to be covered out of pocket, and any debts left behind may be more difficult to manage.

However, certain circumstances can lead couples (or even business partners) to consider a survivorship life policy. It’s a great solution when planning for a few specific needs. Here’s what you need to know:

The life insurance benefit is paid only after both people pass

Survivorship policies are not a good solution if one spouse will need help covering expenses when the other passes. Consider your situation carefully. Will the surviving partner be able to cover medical bills, mortgage payments, and funeral costs that could exceed $10,000? If not, this is probably not the right solution for you. Individual whole or term life policies are designed to provide financial support to your family in these situations.  

Survivorship life premiums may be less than the cost of two separate policies

Typically, a survivorship policy is less expensive than two policies that add up to the same amount. For some, it may make sense to consider a survivorship policy if your desired amount of coverage is too expensive with individual policies.

It can be used to build cash value

Like all permanent life insurance, most survivorship policies will build cash value over time. That can be used while one or both of the insured are still alive but accessing a policy’s cash value will reduce the available cash surrender value and the total paid to your beneficiaries when you pass. The money can be used for anything, but dealing with emergencies or paying the final expenses of the first partner are the most common uses.

Related: Can you cash in life insurance?

It will likely require a medical exam for both parties

While some policies may waive the exam for smaller coverage amounts, most will need to be medically underwritten. That means both parties covered will need to pass a life insurance medical exam. It’s a relatively smooth process that involves a few tests you’re familiar with from yearly checkups, like a physical and a blood draw. It’s normally free and takes about 30 minutes.

Do you have to be married?

Most often, the two policyholders are a married couple, but that is not a requirement. Any two people with a joint financial interest can set up a survivorship life policy. It could be a parent and child or family friends who co-own an asset like a vacation house. Sometimes, survivorship policies are used by business partners for succession planning. If you’re unsure if you need a survivorship life policy, an agent can go over your situation and help you find the right path forward. 

Reasons to consider a survivorship life policy

Survivorship life insurance is usually used for estate planning to help with tax burdens and ensure a smooth transition of wealth to heirs. For most couples, two separate policies will be a better solution, but there are many important reasons to consider a survivorship life policy. Here are a few of the most common:

One spouse does not qualify for single coverage

Sometimes, one spouse may be disqualified from an individual life insurance policy, usually because of underlying medical issues. In certain cases, if the other half of the couple is healthy, the spouse with health issues may qualify to be included in a joint survivorship life policy.

Supporting lifelong dependents

If you have a dependent who needs permanent care, like an adult child with a disability, a survivorship policy sets up as a special needs trust and can ensure that they have what is needed after you’re gone.

Estate planning*

For wealthy couples, a survivorship policy can provide liquidity to heirs that may help them cover future estate taxes associated with an inheritance. This becomes a necessity only for assets over $11.7 million per individual (for federal taxes in 2021). Some states have additional taxes that make a survivorship policy beneficial at lower amounts. Our agents can help with estate planning.

Business succession planning

When the owners of a family-run or other small business pass, there is often confusion around who takes over the business and what stake each surviving family member has. A survivorship policy can help ease the transition and make sure all interested parties are cared for, while maintaining the integrity of the business.

Everyone’s situation is unique. Whether an individual or joint survivorship life is right for you, the next step is to talk to an agent. We’re here to help you find the right solution to give you the peace of mind you deserve and ensure your family is taken care of now and in the future.


Want to learn more about life insurance?

A New York Life financial professional can help determine what’s right for you.

*Neither New York Life nor its agents offers personal tax advice. Consult your tax adviser to find out whether the universal concepts in this article apply to your personal circumstances.

In Oregon, the Policy Form Number for New York Life Custom Survivorship Whole Life is ICC18219-100P