In most cases, life insurance -- typically term life -- provides a safety net to replace income in case a family provider dies.

But if you want to leave behind a legacy, protect an estate or family business, or fund a trust for a child with special needs, you need permanent life insurance. Such insurance covers your whole life and pays a death benefit regardless of when you die.

One option to consider is survivorship life insurance, also called joint or second-to-die life insurance. The coverage lets you insure two people -- usually you and your spouse or business partner -- on just one policy.

Survivorship life insurance pays a death benefit only when the second insured person dies. You might consider this coverage if you:

  • Have a large estate. Generally, you can pass on your estate to your spouse without leaving behind a tax burden. But once your spouse dies, your heirs could face a hefty tax bill. If named as beneficiaries on the life insurance policy, your heirs can use the death benefit, which is not taxable, to pay the estate taxes.
  • Own a family business to pass on to the kids. Faced with a big tax bill for the inherited business, your children could be forced to sell off part of the business. Life insurance can prevent such a scenario.
  • Want to join your spouse in leaving a legacy for a charity.
  • Want to provide for a child with special needs. Life insurance can be used to fund a special needs trust to provide for a child's lifelong needs after the second parent dies.

If the death benefit isn't needed until both of you die, then survivorship life insurance provides several advantages. Generally, life insurance rates for survivorship coverage are lower than for two separate policies to cover each of you. It also makes for simpler planning, and the underwriting is looser. You both might be able to get coverage with a survivorship policy, even if one of you has difficulty qualifying for a single-life policy because of a health condition.

Survivorship life insurance is available in both universal and whole life policies, depending on the life insurance companies providing the coverage.

You should have a good financial-planning team -- an accountant, attorney and savvy life insurance agent -- if you have a large, complex estate, or are planning how to leave behind a business or provide for a child with special needs. Talk to your team of advisers about the right type of life insurance to buy and to make sure the appropriate legal structures are created before you get life insurance quotes.