I'll write survivorship policies right this comes up sometimes it's not that well-known
of a topic we're gonna be going to give you a quick crash course on these and really when
they can work very well so when it comes to survivorship policies all right firstly what
that is it is one policy on two individuals all right usually a husband and wife but it can be
on anyone some companies use these so one policy on two individuals here's the main point or the
main piece to be aware of is that the actual life insurance piece call it the death benefit that is
not paid out until both individuals die so if you have a survivorship policy right in your
couple if something happens to the husband or just to the wife the death benefit is not
paid out to the spouse right it's only paid out typically to the next generation or a trust when
both individuals die so that's important just to be aware of especially if the death benefits are
concern here's the major advantage is when you look at the cash value because oops the death
benefit does not pay out until both individuals die the insurance company knows that there's a
good chance they're probably going to hang on to that death benefit claim for a longer period of
time so as a result my actual insurance expenses based off of the mortality tables are less so if
I've got a policy with the same company same dividend rate but a survivorship policy when I
look at my net returns single life compared to any survivorship guess where I'm gonna have more money
survivorship so it is a nice advantage to enhance my returns on a life insurance policy that's the
clear advantage now there is also something to be aware of when it comes to the MEK laws around this
and what can trigger a taxable event is that the seven pay test right that whole idea especially
where I can chop off a term rider that doesn't exist with the survivorship policy it is much
easier to trigger a MEK if I do things improperly right which we can go into more detail on let's
look at a spreadsheet though how's that sound all right so what we've got here let's use our Excel
draw instead I like that better yeah so a couple examples here firstly what we have our policies
with MassMutual right for this example what we're going to look at is a 50-year old male 50 year old
female and a 50 year old male and female combined two survivorship policy we simply want to see if
I pay the same amount of money in ratios are the same meaning of my policy my premium set at five
thousand everything else goes in the cash total of fifty K ten times the minimum premium here's
what I get here's the mail after five years I've paid in a total of $250,000 I've got a
positive return that's good that's what I want female same thing a little bit stronger right
now your premium to cash ratios with the male and female just a note here are identical so why
the female has more money they live longer than guys they're priced much more favorable right
so you're gonna see all the way through right if you go down to year 25 20 in the mail 536 on the
female a huge difference but you could call it they win because they live longer they get more
money now what we want to look at here your 5 the survivorship policy 258 the break-even point is
just about year 4 - 900 bucks not even right you've got more money right out of the gates
and especially as time passes by let's look at the same year twenty mark mail standalone policy 523
female 536 joint 547 right these are not huge returns in terms of the differences but if we
are looking to maximize our value especially if I'm gonna add a zero at the end of this 50k per
year then obviously you're gonna see a difference there but survivorship accounts are going to give
us more money we've got the year-over-year internal rate of return as well you can see
the difference there right we maxed out at a higher level with the survivorship then we do
with everyone else one last point we want to touch on here is after year seven what do we always do
when we maximize the efficiency in the design of a policy cut the term writer right get rid
of it here's the 50 year old male death benefit drops because we cut the term writer female death
benefit drops because again we cut the term writer survivorship no cut can't do it if we do that what
ends up happening here is you will see a Mac occur to give the short overview of how this
works if is if at any point in time that death benefit drops below right where we originally
started or the MEC limit drops below any year's contribution we will trigger a Mac yeah the cash
value will be strong but then we have to deal with taxes so if we set everything up right and
it works to our benefit where the death benefits not a concern at all a survivorship policy will
end up giving us more money and regarding the banking concept borrowing and repaying that's
all the same you can leverage it exactly the same as you can a single life policy hope this helps