Disadvantages of Second-to-Die Life Insurance

The following are disadvantages of second-to-die life insurance:

  1. SL provides no death benefits upon the first death. If coverage is desired or needed for the first death, a special rider paying the desired amount can be added to the SL policy. Otherwise, one should consider a combination of SL and joint life (first-to-die) insurance with death benefits associated with each policy appropriate to the need.
  2. In term/permanent plans, there is a risk that premiums could escalate prohibitively if dividends are lower than projected and/or term rates increase.
  3. In Indexed and Variable SL plans, there is a risk that the cash value may not increase as quickly as anticipated requiring additional premiums to be paid.
  4. Reducing or skipping premiums in a Guaranteed No-Lapse SL policy may cause the guaranteed to be forfeited resulting in a policy lapsing before the second death occurs.
Reproduced with permission.  Copyright The National Underwriter Co. Division of ALM

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