A thoughtful revision of Section 2042 which fully takes into account the modern life insurance market-place is the best solution. The more logical approach would be to include the interest of the first deceased insured in his or her estate as if the decedent had died owning a life insurance policy on another's life. Section 2042 could then apply only at the second insured's death and only if the second insured had incidents of ownership. Even with this approach, a problem exists concerning the valuation of the decedent's interest. Insurance companies have written survivorship policies in one of two ways.
Most newer policies insure on the basis of the joint life expectancy of the insurers.
Older policies were written to insure both lives separately under a single contract. The regulation is not conceptually applicable, however, to the valuation of those contracts which insure both lives separately. These valuation problems will certainly arise and will have to be addressed. Consider the situation where only one of the insurers possesses incidents of ownership. Harry and Grace purchased a survivorship policy on their joint lives.