Life Insurance Policies, Provisions, Options and Riders Practice Test 2025 - Free Practice Questions and Study Guide

Survivorship life insurance policies, also known as second-to-die policies, are specifically designed to provide a death benefit that is paid out upon the death of the second insured individual. This feature can be extremely beneficial for estate planning because the funds from the policy can be used to cover significant expenses at the time of the second insured’s passing, including estate taxes.

Estate taxes can be substantial and are typically due shortly after the death of the second spouse. If not planned for properly, heirs may be forced to liquidate assets to pay these taxes. By utilizing a survivorship life insurance policy, families can ensure that the necessary funds are readily available to meet these obligations, thus preserving the estate for heirs and maintaining family wealth.

The other options, though they may relate to various forms of life insurance or financial planning, do not directly address the unique advantages that survivorship policies offer for estate planning needs, particularly in managing tax liabilities linked to the estate.