What is a "second-to-die" policy used for?

A "second-to-die" policy, also known as a survivorship life insurance policy, is specifically designed to pay out a death benefit after the death of the second insured individual. This type of policy covers two individuals, typically a married couple, and is structured so that the death benefit is triggered only when both insured parties have passed away. It is commonly used in estate planning, as it can provide liquidity to cover estate taxes and other financial obligations upon the death of the second spouse.

The structure of a second-to-die policy means that premiums are generally lower than purchasing two individual life insurance policies, making it an attractive option for couples looking to manage their estate effectively without immediate benefits upon the first death. This aspect highlights the policy's purpose in facilitating financial planning for the long term, focusing on the eventual transfer of wealth rather than immediate coverage for each individual.