Variable Survivorship Life Insurance in Australia: 2025 Guide

Estate planning in Australia has evolved, and for families seeking flexibility and robust protection, variable survivorship life insurance is gaining momentum. This insurance type, often called ‘second-to-die’ cover, is designed to support sophisticated wealth transfer and legacy strategies—especially valuable in a 2025 landscape shaped by ongoing tax reforms and shifting family structures.

What is Variable Survivorship Life Insurance?

Variable survivorship life insurance is a policy taken out on two lives—typically spouses or business partners—but pays the death benefit only after both insured parties have passed away. The ‘variable’ aspect allows the policy’s cash value to be invested in a variety of sub-accounts, similar to managed funds, giving policyholders greater control over the potential growth of their premiums.

• Dual-life coverage: Both insured must pass before a payout.
• Investment options: Choose how the policy’s cash value is invested, with returns tied to market performance.
• Flexible premiums: Adjust payments to suit changing financial circumstances.

Estate Planning and Tax Efficiency in 2025

With the Australian government’s 2025 review of inheritance tax proposals and superannuation reforms, families are increasingly looking for ways to shield assets and streamline wealth transfer. Variable survivorship life insurance offers several advantages:

• Defers estate tax impact: Because the payout is delayed until the second insured dies, families can plan for a more significant, tax-efficient legacy.
• Funds for estate costs: The death benefit can cover capital gains tax, superannuation death benefit taxes, or other estate settlement costs, reducing the burden on heirs.
• Asset growth potential: Policyholders can grow the policy’s value through market-linked investments, potentially outpacing inflation and rising costs.

Example: A Sydney couple with substantial property and super balances might use a variable survivorship policy to ensure their children receive a tax-free lump sum to offset taxes triggered by asset transfers upon the death of the surviving parent.

Why Australian Families Are Considering Variable Survivorship in 2025

Several trends are driving demand for this insurance in Australia:

• Blended families: With remarriages and stepchildren more common, these policies allow for tailored legacy plans that provide for all beneficiaries.
• Business succession: Business owners can use survivorship cover to fund buy-sell agreements or equalise inheritances among children involved (or not involved) in the family business.
• Superannuation caps: As tighter contribution and transfer balance limits come into effect in 2025, families are using insurance outside super to ensure liquidity for estate obligations.

Modern providers also offer digital policy management and flexible investment menus, letting families adjust their strategy as market conditions or personal circumstances change.

Key Considerations Before Choosing Variable Survivorship Life Insurance

While variable survivorship life insurance can be a powerful solution, it isn’t for everyone. Australians should consider:

• Complexity: The investment-linked component and dual-life structure require careful planning and ongoing review.
• Costs: Fees and investment risk can affect cash value performance—compare providers and options closely.
• Tax laws: Legislation around estate taxes and superannuation continues to evolve. Policies should be reviewed in light of the latest 2025 reforms.

Consulting with a financial adviser familiar with advanced life insurance strategies and current Australian tax law is essential to tailor the policy to your family’s needs.