Second to Die: What You Need to Know about Life Policies

Married couples often buy Life Insurance, and amongst these policies is the “Second-to-Die.” It’s simple to see why the couples want it: when the second parent dies, the death benefits will be handed down to the heirs. But, there are some secrets about these policies that I will tell you—just as I tell any client of mine in my day-to-day life as Michael Ioane, Consultant.

Why a Second-to-Die Policy?

To put this simply, when buying a policy based on death benefits, you want the cheapest policy that also provides the biggest payout. With Second-to-Die policies, companies are easier with their purse strings, so you can enjoy lower policy prices.

And why is that, you might inquire? The prices are lower and the companies less stingy because they know the policy will pay off much longer down the road compared to other policies. Less to worry about for them, better savings for you.

The Catch: You Need to Buy Using ILITs

You’re probably scrunching your nose at the acronym. “Michael Ioane, what does ILIT mean?” you might be saying. Well, as Michael Ioane I can say “ILIT” stands for Irrevocable Life Insurance Trust. A sad problem with buying a Second-to-Die policy is that you will be forced to buy your insurance using an ILIT.

The ILIT has the side effect of tying up the money in it until the second parent’s death. But what if you, the beneficiary (or your child, the beneficiary) could use the money? What if you need the money?

You could buy a policy for each parent—an expensive proposition. And what if one of the parents ends up not being insurable? Surely you cannot just surrender the Second-to-Die policy and take the lower payout and higher cost of the First-to-Die?

No, you don’t have to do any of that. The fix is something my team can help you out with in a jiffy: buy a Second-to-Die policy with a First-to-Die rider. I won’t confuse you by trying to narrow down the explanation of the First-to-Die rider on a Second-to-Die policy, so I’ll just say that by performing a 1035 Exchange on a Second-to-Die policy with a First-to-Die rider, the Second-to-Die policy will pay out at the first insured’s death.

It is a strong concept.

Tell people you know about the Second-to-Die policy with a First-to-Die rider. Does it seem of interest to them? Is it of interest to you?

This is how you can tell the usefulness of the Second-to-Die/First-to-Die rider. Not to mention the following example.

A married couple near 70 are rated as “preferred for underwriting” and “standard.” They want a massive death benefit to be passed down upon their death. Traditionally, they would have followed a bog standard Second-to-Die policy wrapped in an ILIT.

Okay, say this couple wants a $5 million death benefit that pays out $1 million with the First-to-Die policy and $4 million with the Second-to-Die policy. Nothing wrong with that, right?

With the First-to-Die rider and Second-to-Die policy, as opposed to a policy, you can be paid half of the total $5 million with the death of the first parent.

What Else is a First-to-Die Rider Good For?

Any Buy/Sell Agreement needs insurance on the owners; if one should die, the other can buy himself out. After all, what if one of the two owners is older or has health problems? If they buy policies on each other, the younger/healthier will have to pay off more on the older/sicker.

Utilizing a First-to-Die rider on a Second-to-Die policy, the owners can buy one insurance policy for both of them. The cost will be lower due to Second-to-Die policies underwriting based on the younger insured individual.

As always, send me an e-mail or drop a comment on the Michael Ioane blog if you need help with this unique Life Insurance policy.


If you are buying life insurance to pass down your wealth, a Second-to-Die policy is simply the cheapest way to accomplish that goal. If you want more than just what the typical First-to-Die policy pays out on death of the first parent, buy a Second-to-Die policy/First-to-Die rider.

Last of all, if you have a Second-to-Die policy set up with your estate planning, you turn it into a First-to-Die rider/Second-to-Die policy. It’s the smartest, and safest, choice you could make.