What is a key characteristic of a survivorship life policy?

A survivorship life policy, also known as a second-to-die policy, is designed specifically to pay out benefits only after both insured individuals have passed away. This characteristic makes it a unique financial tool for estate planning purposes, especially beneficial for couples who want to ensure their heirs receive a death benefit after both have died.

The policy is often used in situations where the intent is to provide liquidity for the estate, helping to cover estate taxes or other expenses that may arise at the time of the second death. Because the death benefit is paid out after the demise of the last insured, it can be a cost-effective way to secure a larger death benefit than would typically be available through individual policies, considering the premiums involved.

The other options do not accurately reflect the nature of a survivorship life policy. For instance, it does not cover just one insured individual, nor does it pay benefits upon the death of the first insured; these characteristics pertain more to traditional individual life insurance policies. Lastly, while it can have implications for retirement planning in terms of estate strategy, its primary function is focused on the death benefit triggered by the passing of both insureds.