Life Insurance
  1. Overview
  2. What It Covers
  3. Learn More
  4. FAQs
Overview
Life insurance is a financial product that you buy that gives your loved ones financial security when you die. The money they receive can be used to pay for ongoing household expenses, paying off a mortgage, funding college, moving and other expenses that arise. It is a way of providing peace of mind that your loved ones will be taken care of if/when you die.
Life Policy Types
Product
Description
Term
Term life insurance is, quite simply, insurance that protects you for a specific period of time, or "term". You pay your premium and if you die during the period of time that you're covered, SBLI will pay benefits to your loved ones. It's that simple.
Whole Life
In addition to financially protecting your family a whole life insurance policy builds cash value that, in most cases, grows without being subject to taxation. Better yet, not only can your death benefit - the amount your loved ones receive when you die - increase, but once there is cash value, you can borrow up to that value to use as you see fit.
Universal Life
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Annuities
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The above is meant as general information and as general policy descriptions to help you understand the different types of coverages. These descriptions do not refer to any specific contract of insurance and they do not modify any definitions expressly stated in any contracts of insurance. Please contact Carroll Steele Insurance and talk to one of our Insurance Specialists to get a full understanding of the coverages available and what might be the best for your specific needs.

Learn About Life Insurance

What are the principal types of life insurance?

There are two major types of life insurance—term and whole life. Whole life is sometimes called permanent life insurance, and it encompasses several subcategories, including traditional whole life, universal life, variable life and variable universal life. In 2003, about 6.4 million individual life insurance policies bought were term and about 7.1 million were whole life.

Life insurance products for groups are different from life insurance sold to individuals. The information below focuses on life insurance sold to individuals.

Term

Term Insurance is the simplest form of life insurance. It pays only if death occurs during the term of the policy, which is usually from one to 30 years. Most term policies have no other benefit provisions.

There are two basic types of term life insurance policies—level term and decreasing term.

  • Level term means that the death benefit stays the same throughout the duration of the policy.
  • Decreasing term means that the death benefit drops, usually in one-year increments, over the course of the policy’s term.

In 2003, virtually all (97 percent) of the term life insurance bought was level term.

Whole Life/Permanent

Whole life or permanent insurance pays a death benefit whenever you die—even if you live to 100! There are three major types of whole life or permanent life insurance—traditional whole life, universal life, and variable universal life, and there are variations within each type.

In the case of traditional whole life, both the death benefit and the premium are designed to stay the same (level) throughout the life of the policy. The cost per $1,000 of benefit increases as the insured person ages, and it obviously gets very high when the insured lives to 80 and beyond. The insurance company could charge a premium that increases each year, but that would make it very hard for most people to afford life insurance at advanced ages. So the comapny keeps the premium level by charging a premium that, in the early years, is higher than what’s needed to pay claims, investing that money, and then using it to supplement the level premium to help pay the cost of life insurance for older people.

By law, when these “overpayments” reach a certain amount, they must be available to the policyowner as a cash value if he or she decides not to continue with the original plan. The cash value is an alternative, not an additional, benefit under the policy.

In the 1970s and 1980s, life insurance companies introduced two variations on the traditional whole life product—universal life insurance and variable universal life insurance.

What are the different types of permanent policies?

  • Whole or ordinary life
    This is the most common type of permanent insurance policy. It offers a death benefit along with a savings account. If you pick this type of life insurance policy, you are agreeing to pay a certain amount in premiums on a regular basis for a specific death benefit. The savings element would grow based on dividends the company pays to you.
  • Universal or adjustable life
    This type of policy offers you more flexibility than whole life insurance. You may be able to increase the death benefit, if you pass a medical examination. The savings vehicle (called a cash value account) generally earns a money market rate of interest. After money has accumulated in your account, you will also have the option of altering your premium payments – providing there is enough money in your account to cover the costs. This can be a useful feature if your economic situation has suddenly changed. However, you would need to keep in mind that if you stop or reduce your premiums and the saving accumulation gets used up, the policy might lapse and your life insurance coverage will end. You should check with your agent before deciding not to make premium payments for extended periods because you might not have enough cash value to pay the monthly charges to prevent a policy lapse.
  • Variable life
    This policy combines death protection with a savings account that you can invest in stocks, bonds and money market mutual funds. The value of your policy may grow more quickly, but you also have more risk. If your investments do not perform well, your cash value and death benefit may decrease. Some policies, however, guarantee that your death benefit will not fall below a minimum level.
  • Variable-universal life
    If you purchase this type of policy, you get the features of variable and universal life policies. You have the investment risks and rewards characteristic of variable life insurance, coupled with the ability to adjust your premiums and death benefit that is characteristic of universal life insurance.
Frequently Asked Questions
Question
Answer
I have group life insurance through work. Should I still buy more life insurance?
That’s a great question! Many people feel that the life insurance they have as an employee benefit is more than adequate. For some people, the amount may be sufficient but for others, it may not be enough. It really depends on your particular life situation. In addition, depending on the specifics of the group plan your employer offers, your employer could cancel your group coverage at any time; the insurance company providing the coverage could notify your employer that they will no longer be offering that coverage; and/or your coverage may end when you leave the company or if you become disabled. Also, with some group life insurance products, the price you pay changes. In most cases, it’s in your best interest to supplement your group life insurance policy with one that you own individually.

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