66. A married couple who wants life insurance benefits to pay estate taxes when the second spouse dies should purchase what policy?
Answer: C
Survivorship policy is the best option for estate tax coverage.
A survivorship policy is specifically designed to provide a death benefit that can be used to cover estate taxes upon the death of the second spouse, making it ideal for married couples in this situation.
A) Family policy.
A family policy generally covers multiple family members under a single policy, but it does not specifically address the needs for estate tax coverage upon the death of the second spouse. Therefore, it is not appropriate for the scenario described.
B) Joint life policy.
A joint life policy insures two lives but pays out only upon the death of the first insured. This means it would not provide funds to cover estate taxes after the death of the second spouse, making it unsuitable for the couple’s needs.
C) Survivorship policy.
A survivorship policy, also known as a second-to-die policy, pays out only after both spouses have passed away. This characteristic makes it particularly effective for addressing estate taxes since the benefit is available to cover those taxes when the second spouse dies.
D) Universal life policy.
A universal life policy provides flexible premiums and death benefits but does not specifically cater to the need for covering estate taxes upon the second spouse's death. Thus, it does not fulfill the couple's requirement for estate tax planning.
Conclusion
The survivorship policy is definitively the right choice for the couple, as it specifically addresses the need for a death benefit to cover estate taxes after the death of the second spouse. In contrast, the other options either do not provide the necessary coverage or are not structured to meet the couple's specific estate planning needs.