Although insurance policies primarily guarantee that survivors receive the financial benefits arising from it on the death of the insured person, the manner of payment often differentiates between different kinds of insurance policies. Most policies revolve around a single person, who ensures that the designated heirs mentioned in the policy receive the insurance amount immediately on the death of the person. It is up to the heirs to decide how they would like to use the money.
The outlook towards life insurance is still the same as most people see it as a primary way of protecting families in case the only breadwinner departs untimely. However, this is not the only way to perceive the protection of life insurance because it can turn into a comprehensive retirement plan, help heirs to pay estate taxes and even help to transfer wealth or leave an inheritance. Many people still do not appreciate or understand the value and benefits that life insurance can provide when heirs face the burden of maintaining estates by paying high estate taxes. How parents can help to mitigate the burden of heirs in paying estate taxes will be apparent on reading this article.
Take an Appropriate Insurance Policy
Life planning has to begin early so that you can keep the premiums of life insurance policies low. Since life insurance policies consider the life risks to determine the premium, life risks being low during early ages help to keep premiums low. Also, you must have the foresight about the goals of your life so that you can take the cover of the liabilities likely to arise in future. If you are worried about how your heirs, who inherit your property, could arrange for finances to pay estate taxes, then buying a second to die policy of life insurance provides the right solution. The proceeds available from the policy would help to pay the estate taxes that make it easy to retain the property without any difficulties.
One Policy, three Goals
If you look at the features of the second to die insurance, you will discover that the policy is unique from other insurance policies because it helps to meet three goals in your life. Firstly, the policy is suitable for those who want to transfer wealth or leave an inheritance. Secondly, like other life insurance policies, it helps to save taxes and thirdly, create estate liquidity to facilitate payment of estate taxes. The policy is one of its kinds because no other insurance policies help to meet all these goals.
Special features of the Policy
What kind of insurance policy you should take will depend on the goals of your life. Since different people have different goals, and since they adopt different ways of realizing the same, what you want to achieve and in what way determines what kind of life insurance policy would be most suited for you. First, you should know that the second to die insurance covers not the individual but the couple. Therefore, you must be ready to take your spouse into confidence at the time of taking the policy. Unlike other life insurance policies, the death benefit does not pass on to the heirs immediately on the demise of one policyholder but only when both pass away. This aspect upholds the purpose of the policy that helps in paying estate duties by the heirs in the absence of the parents (policyholders).
The policy is suitable in some special circumstances. An easy way of deciding whether the policy would be suitable for you is to judge if you are likely to come across such situations in life.
- If one of the spouses experience poor health, taking individual insurance policies would be quite expensive as compared to the second to die insurance.
- Any couple who wants to provide financial support to their child with particular need when both die could opt for the policy.
- The policy also suits people who want to leave an inheritance and even two businessmen intending to leave a corpus of funds for the inheritors of business can make use of the policy to achieve their goals.
- Most importantly, couples who are on the lookout for some means of funding estate taxes when both die would find the policy just appropriate for their needs.
Cost is Less
The price you pay for a second to die insurance policy is much lower than what you would pay if you had to take life insurance policies in individual names. As the insurance policy covers the lives of a couple and the benefits paid only after both pass away, it takes into consideration the risk of two individuals clubbed together, which is apparently lower that the risk accompanying each.
To retain the estate and assets within the family and for complete estate protection, the second to die insurance policy is truly unmatched.