What benifit would a life insurance policy have with both my parents names as insured vstwo seperate policys?

What benifit would a life insurance policy have with both my parents names as insured vstwo seperate policys Asked by moes 34 months ago Similar questions: benifit life insurance policy parents names insured vstwo seperate policys Business > Financial Planning.

Similar questions: benifit life insurance policy parents names insured vstwo seperate policys.

These policies are called Joint life or Survivorship life and are mostly used for Estate Planning. Joint life and survivor insurance is a type of life insurance coverage for more than one person, typically couples. With joint life and survivor insurance, benefits are not paid until the both policyholders have died.

Lower premiums exist on this policy than on individual life policies because of the potential for a much longer period of time before the policy is called upon to pay benefits. Joint life and survivorship insurance is a tool often used to help pay estate taxes, because estate taxes can be delayed until both husband and wife die. This is the most important fact regarding this type of policy.It really should only be used for estate tax purposes.

But, these policies are often not sold correctly, and can , in fact, be one of the most expensive forms of insurance you can buy. Survivorship life insurance may have some serious consequences for the insured and their heirs that sometimes get overlooked. One such risk is where one spouse lives to or beyond life expectancy.

Since the policy doesn't pay until the second of the spouse dies, such a long time frame may reduce the advantage of the death benefit as a cheap way to pay the estate tax. A more serious consequence may occur when one spouse dies at an early age and the other spouse lives to an old age. This loss of not paying a death benefit on the first to die has a large lost opportunity cost to the eventual heirs.

In either of the two cases just mentioned, a significant portion of the estate assets may be lost for the heirs. These losses occur because of the lost opportunity costs of premium payments and/or death benefits not paid out at the first death. Let's look at an example: Husband and wife, both age 50.

Face amount of the policy is $1,000,000 and the annual premium is $5,000. The rate of return on money this couple can get after tax is 3%. The plan was set up projecting the couple would live to age 85.

So, first you have to look at how much premium will be paid. $5,000 x 35 years = $175,000. If either spouse lives longer, then the cost would be more, but for this example we will use age 85.

Instead of the husband dying at age 85, he dies at age 70. Because this is a Second to Die policy, there is no death benefit paid on the first death.So the wife does not get the $1,000,000. And, to make matters worse, if she want to make sure her death benefit stays in force, she has to keep paying the $5,000 each year until she dies.

If there would have been two separate polices, she would have received $1,000,000 in cash to help pay living expenses, and be invested for her and her family's future. But she did not just lose the $1,000,000 death benefit, she also lost what the $1,000,000 could have earned invested in an account earning an after tax rate of 3%. That would have grown to $1,557,967.

($1,000,000 x 3% x 15 years.) This means she and her family has potentially lost over $1,500,000. Now she has to keep paying the $5,000 premium each year until her death at age 85. If she does not have enough money, (I have seen this case many times where the surviving spouse does not have the extra money to keep paying the premium and is forced to cancel the policy.) Now nobody gets any money and all the premiums have been wasted.

Not only that, since, in this example, the policy lapsed, you also lost what the $5,000 a year would have earned over that time at 3%. If your parents have no estate tax issues, in might be in your and their best interest to contact the insurance company. Some companies will allow you to split the policies into two separate ones.

You can then look at the premiums, and see if the cost is justified. In some instances, you also may be able to lower the death benefit to make the two policies more affordable..

Is there a seperate New England life insurance co. From New England Financial? " "what if a life insurance policy is not owned by the insured?

Does it count as a resource for the cash value?

Is there a seperate New England life insurance co. From New England Financial?

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