Final answer:
A survivorship life policy provides benefits upon the death of the second insured person, most commonly used to provide funds to pay off potential estate or inheritance taxes, ensuring that heirs receive the maximum value of the estate without a significant tax burden.
Step-by-step explanation:
A survivorship life policy, often known as a second-to-die policy, generally covers two individuals and provides a death benefit upon the passing of the second insured person. One of the main reasons for purchasing such a policy is D. It provides funds to pay off possible estate or inheritance taxes after both insureds have died. This type of policy is often used as part of an estate planning strategy to provide liquidity for heirs to pay estate taxes, thus preserving the value of the estate for the beneficiaries.
These policies can be particularly useful for high net worth individuals who expect to leave behind a sizable estate that could be subject to significant taxes. It's less about providing immediate financial support to surviving family members upon the first person's death, and more about ensuring that the assets built over a lifetime are not significantly eroded by tax obligations upon the death of the second insured.