What is 'Variable Survivorship Life Insurance'

Variable survivorship life insurance is a type of variable life insurance policy that covers two individuals and pays a death benefit to a beneficiary, only after both people have died. Variable survivorship life insurance does not pay any benefit when the first policyholder dies. Variable survivorship life insurance is also called "survivorship variable life insurance" or "last survivor life insurance."

BREAKING DOWN 'Variable Survivorship Life Insurance'

Like any variable life policy, variable survivorship life insurance has a cash value component in which a portion of each premium payment is set aside to be invested by the policyholder, who bears all investment risk. The insurer selects several dozen investment options from which the policyholder may choose. The other portion of the premium goes toward administrative expenses and the policy's death benefit (also called face value). This type of policy is legally considered a security, because of its investment component, and is subject to regulation by the Securities and Exchange Commission.

A more flexible version of variable survivorship life insurance called "variable universal survivorship life insurance" allows the policyholder to adjust the policy's premiums and death benefit during the policy's life.

Advantages of Variable Survivorship Life Insurance Policies

  • Variable survivorship life insurance policies allow you to invest premiums. Variable survivorship life insurance policies let policyholders invest premiums in a separate account whose value will fluctuate, based on the performance of the market.
  • Cheaper. Variable survivorship life insurance is usually less expensive than traditional single-insured life insurance. In the case of survivorship policies, the premium is based upon the joint life expectancy of the insureds. As such, premiums are slightly cheaper than buying separate policies for both people, since the insurance company owes nothing until both insureds die.
  • Easier to buy. Qualifying for a survivorship life policy is easier than for single-insured life insurance. Since both policyholders must die before the benefit is paid, the insurance company is less concerned about their health. Companies are often willing to write the policy, even if one of the customers is "uninsurable" by traditional life insurance standards. However, those standards can vary.
  • Builds estates. In some cases, survivorship life insurance is marketed as a way to build an estate, not just insulate it from taxes. Like traditional life insurance, the death benefit of a survivorship life policy can ensure that beneficiaries receive a minimum amount of money, even if a policyholder spends every dime during your lifetime.
  • Preserves estates. A survivorship life insurance policy appeals to individuals who wish to leave their assets for heirs. With a survivorship policy, their estate transfers intact to their heirs. In such a situation, the life insurance benefit is used for paying the state and federal estate taxes. 
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