When to Cancel Joint Survivorship Life Insurance

Joint survivorship life insurance was once a staple in estate planning. Many couples bought these second-to-die policies decades ago to cover federal estate taxes or leave a sizable inheritance behind. The idea made sense when tax thresholds were lower and the kids were still at home.

But today, the picture looks different. Tax laws have changed, retirement costs are climbing, and adult children may no longer need the same support. If you are still paying into a joint life policy that you may never need or that no longer fits your goals, it might be time to reconsider what you are getting out of it.

This article explains what joint survivorship life insurance covers, when to cancel it, and how a life settlement for a survivorship policy could help you cash out instead of walking away. If you are exploring whether to sell a joint survivorship policy, read on to review your options.

WHAT IS A JOINT SURVIVORSHIP (SECOND-TO- DIE) POLICY?

A joint survivorship policy, also called a second-to-die life insurance policy, covers two people (usually a married couple) and pays out only after both have passed away. These policies are not for supporting a surviving spouse, but rather to provide a death benefit for heirs, often to cover estate taxes or fund a legacy.

Because the payout only comes after the second death, the premiums are usually lower than two individual policies. That made them popular for high-net- worth families during times when estate tax thresholds were lower. In many cases, couples purchased them decades ago, planning ahead for what they thought would be a significant tax bill.

But the premiums do not stop just because you have retired. These policies can last well into old age, with ongoing payments that quietly drain income that might otherwise go toward healthcare, travel or helping family members now, not after you are gone.

SIGNS YOUR POLICY MAY NO LONGER MAKE SENSE

You may have bought your joint survivorship life insurance with a clear plan in mind. But life changes, and sometimes, the reasons for keeping the policy no longer apply.

Here are some signs that it might be time to reevaluate:

  • Estate taxes are not an issue anymore. With today’s higher federal exemptions, many families no longer have to deal with the estate tax liabilities they once did. If your net worth has decreased or stayed below the exemption threshold, the policy may no longer serve its original purpose.
  • Your beneficiaries are financially secure. If your children are grown, stable and no longer relying on future inheritance, the policy may be doing more for the insurance company than for your family.
  • The premiums are higher than expected. Joint policies often last longer than planned, especially as life expectancy increases. That can mean years of payments during retirement, right when you are trying to stretch every dollar.
  • You have new financial priorities. Rising healthcare or caregiving costs, home modifications or even helping a grandchild through college might matter more than a future payout.
  • Your family circumstances have changed. Divorce, remarriage, estrangement or death can all affect who you want to support, or whether you still need this type of policy at all.

If any of these apply to your situation, it might be time to consider what the policy is costing you and whether it is still worth it.

WHAT HAPPENS IF YOU JUST STOP PAYING?

Many people assume they can simply stop paying the premiums on their joint survivorship policy if it no longer feels useful. But walking away without a plan can cost more than you think.

When you stop paying, the insurer may offer a small cash surrender value, often far less than the policy’s actual value. In some cases, there is no payout at all. That means years (or even decades) of premiums vanish with no return.

Letting the policy lapse without exploring other options can be a missed opportunity. A joint life insurance policy, especially if both insureds are older or one has already passed, may have substantial market value. But the insurer has no incentive to tell you that.

CONSIDER A LIFE SETTLEMENT FOR SURVIVORSHIP INSURANCE INSTEAD

A life settlement lets you sell your life insurance policy to a licensed buyer in exchange for a lump-sum payment. Once the sale is complete, you no longer have to pay premiums, and the buyer takes over the policy.

Most people do not realize this option exists for joint survivorship life insurance. Still, it can apply, especially when both insureds are in their senior years or one spouse has already passed. The older the insured parties are, the more valuable the policy may be to buyers in the secondary market.

The payout you receive in a life settlement is typically higher than the policy’s surrender value. And since it is a regulated financial transaction, you work with professionals who understand how to price and present the policy to institutional buyers.

WHY A LIFE SETTLEMENT MIGHT MAKE SENSE

If your joint survivorship policy no longer serves its original purpose, a life settlement could turn it into something that supports your current needs as well as your estate plan.

Here’s how people often use the funds from a life settlement:

  • Covering health or long-term care expenses: Whether it is in-home help or assisted living, care costs can add up fast.
  • Supporting a spouse or loved one now: Instead of leaving a future benefit, you might prefer to provide assistance while you are still here to see it.
  • Making a meaningful gift or donation: Some people use their payout to help a child buy a home, support a cause or fund a scholarship.
  • Boosting retirement income or reducing financial stress: The added liquidity can ease the pressure of fixed budgets and rising costs.

Selling a policy can feel like a big decision. But it might be the best option if you are unlikely to benefit from keeping it. A life settlement for a survivorship policy could provide a clear, immediate return instead of letting the value slip away.

HOW THE LIFE SETTLEMENT PROCESS WORKS

The process of selling a joint survivorship policy is simpler than most people expect, and there is no obligation to accept an offer.

Here is how it usually works:

  • 1. You contact a licensed life settlement broker. They will review your policy details and determine if it qualifies for the market.
  • 2. The broker gathers offers from institutional buyers. These buyers are investors who purchase life insurance policies as assets.
  • 3. You review the offers and decide whether to move forward. There is no pressure to accept anything that does not feel right.
  • 4. If you agree to a sale, you receive a lump-sum payment. From that point on, the buyer becomes responsible for future premiums.

There are no upfront fees, but you will want to speak with a tax advisor about the tax implications for your specific situation. The key is transparency and control at every step.

IS THIS THE RIGHT MOVE FOR YOU?

Selling a joint life insurance policy is a personal decision, and it is not right for everyone. But it may be worth exploring if you are asking yourself questions like:

  • Do we still need this coverage?
  • Are the premiums cutting into our retirement income?
  • Would the cash be more useful now rather than later?

A life settlement may provide flexibility that better fits your current life situation. Speaking with an advisor or a broker who specializes in life settlements can help you make a confident decision based on your goals, not outdated assumptions.

YOUR POLICY, YOUR CHOICE

You may have paid into your joint survivorship life insurance policy for years, even decades. Before you let it lapse or surrender it for a fraction of its potential value, it’s worth understanding its value on the secondary market.

A life settlement puts you in control. If the policy no longer supports your goals, selling it could give you the financial breathing room to focus on what matters now — whether that’s care, travel or helping family while you are still here to enjoy it.

Curious what your joint life policy might be worth? Reach out to a licensed life settlement broker at Life Settlement Advisors for a no-obligation policy review. Contact us today.

Get in touch with Life Settlement Advisors today to take the first step toward converting your policy into cash.
Life Settlement Advisors
Leo LaGrotte
llagrotte@lsa-llc.com
At Life Settlement Advisors, we strive to be a voice of confidence and assurance for our clients. Our goal is to educate you about the life settlement process so you can make an educated decision about whether it is right for you.