What you need to know about life insurance
A basic guide to life insurance types, coverage and quotes.
Life insurance is your family’s biggest safety net. You want to be sure that the type of life insurance you buy and the amount of life insurance coverage you get are what you need. Too little, and you won’t have enough. Too much, and you’ll end up paying more than you have to.
This guide provides the basics about life insurance options to consider, how to pick the right amount of life insurance coverage for your policy and comparing life insurance quotes – all the essentials to help you feel confident about protecting your loved ones.
Basic types of life insurance
Term Life Insurance
Term life insurance is straightforward and easy to buy. You choose a policy amount (known as coverage), and then pick the number of years you want that protection to last. This is called the term, or term period.
The cost of your policy is determined by combining the chosen coverage and term period with age and health history. Some simple yes or no questions will also be asked to see if you carry other risk factors – for example, any insurer would want to know if you race jet-powered motorcycles as a hobby.
In general, most families want the affordability and simplicity of term life insurance. For example, a 30-year-old male who’s in top health can get $500K of protection for 20 years – at a cost of around $22 per month.1 Here are some other sample term life rates.
If you’re budget conscious and need to affordably protect your income and debt until retirement age or just until the kids are out on their own, this is likely your best option, because term life insurance is going to cover all or most of your needs.
Whole life insurance
One of the main things people consider when comparing types of life insurance is cost. And we’ll be honest here: whole life insurance2 is simply not as affordable as term life insurance. For most people, buying $500,000 of whole life insurance would probably break the budget. But there are still a lot of good reasons for people at all income levels to consider some amount of whole life.
First off, whole life insurance has no end-date to the policy. No policy term period means a lifetime guarantee that your loved ones will get a financial benefit at some point. In other words, with whole life insurance, it’s never if, but when it pays a benefit. This guarantee is the primary reason most people buy whole life insurance. Consider how even a small guaranteed benefit could make a big financial impact on your loved ones.
There are other big benefits of whole life insurance, too. The policy’s cash value offers attractive returns, tax-advantaged cash growth3 and quick access to tax-free borrowing.4 While these things are great for everyone, they are especially attractive to those who’ve already maxed out their contributions to other tax-advantaged accounts; or who have enough in the bank that it makes good financial sense when compared to letting things hibernate in a standard, low-interest account.
Whole life is also very attractive to those who’ve built themselves a nice little nest egg after years of savvy retirement planning. Most folks want to gift everything possible back to the family; and with a guaranteed, tax-free death benefit for life, whole life insurance can be a key part of a comprehensive estate plan.
In all cases, talking with a dedicated life insurance professional will help you make the right policy solution choices.
Buying life insurance just got easier
Knowing you’ll pay a fair price for the right policy is great. But getting that life insurance policy without all the complications is even better. Our innovative Accelerated Underwriting process does just that – removing steps and hassle from the process of buying life insurance. We streamlined buying life insurance, so your policy will be in place up to 2x faster5 than traditional underwriting life insurance options.
Need a secure place to store your life insurance policy and other important family documents?
All SBLI customers will receive a complimentary subscription to LegacyShield.
All SBLI customers will receive a complimentary subscription to LegacyShield.
Understanding life insurance quotes and rates
Online life insurance quotes
For many, an early step in shopping for a term life policy is getting an online quote. This estimated monthly cost for your policy is often referred to as your rate, or life insurance rate. It’s calculated online using just some basic factors such as your chosen coverage amount, term period, nicotine use and age. Usually, things like weight, height and family medical history are answered later via a more comprehensive application.
Will your final rate differ from your quote?
The short answer is: maybe. For instance, if someone says they don’t smoke when quoting online, but then is found later on to be a heavy smoker – they should expect a cost increase on their policy. Other things not included in the online quote, such as weight, risky hobbies and medical issues may also alter your rate during application.
However, most people’s final rate matches or nearly matches their online quote. If your final rate is different, it will likely be different with any life insurance company – since most life insurance companies consider the same risk factors when setting what you’ll pay. It is wise to not just compare online quotes but to also shop around based on your unique set of risk factors. For example, one life insurance company may greatly increase the cost for type 2 diabetes, while another only slightly increases the rate. The point is, just comparing online quotes won’t show you where you may save based on your unique risk factors.
Getting the right life insurance coverage
Plan your coverage
A lot of people start shopping for life insurance with a coverage amount already in mind. The pros suggest you complete a life insurance needs analysis. It takes just a couple minutes with an online life insurance calculator and could make a world of difference to your family years from now.
Think ahead
Everyone’s family and financial situation is unique; but overall, the cost of things like children, mortgages and college expenses increase over time. Don’t pick your coverage just for today. Consider what lies ahead and try to make sure you have enough life insurance coverage to account for it.
Employer coverage alone can fail you
Consider that your employee life insurance probably only offers about 1-2 times your salary — which won’t last very long if your loved ones are relying on it to make ends meet. Plus, as soon as you change jobs, you’ll lose it, leaving those you care about the most with little or no protection. Fortunately, when you keep your own policy, you won’t have to worry about these concerns. So while you may appreciate having employee life insurance, it’s best to think of it not as your primary safety net, but as a little bonus protection should your family ever need it.
Term lengths made simple
Term length options
Term life insurance policies are based on a particular number of years you choose. Choices are usually 10, 15, 20, 25 or 30 years. Some companies also offer 1-year term options. Whole life doesn’t have a term length as it is designed to last until you die.
Common term considerations
Agents will recommend you choose a term period based on what you want to protect the longest. That is usually the years left on your mortgage, the number of years until your youngest child is independent, or the number of years until your spouse retires. Everyone’s situation is unique and picking the right term can help make sure your life insurance policy is the right fit for your family.
Avoid this big term mistake
A lot of people make the mistake of buying a 10-year term and then returning to buy another policy later. The problem is, this requires a new health exam. And since rates go up with age, they realize too late that buying a 20- or 30-year term policy initially would have been a smarter financial choice.
Sample term life insurance rates
Often, SBLI’s life insurance rates are the most affordable. Sometimes they’re not. But we can guarantee they’ll always be fair and straightforward, with no hidden surprises. For example, if you were a 35-year-old male who’s never used nicotine, here’s what you could expect to pay per month for term life insurance with us:
| 10 YEAR | 20 YEAR | 30 YEAR | |
|---|---|---|---|
| $300,000 | $15.45 | $18.30 | $27.11 |
| $500,000 | $18.27 | $25.91 | $39.50 |
| $1,000,000 | $29.58 | $38.71 | $69.69 |
Other life insurance products
Children’s whole life insurance
Whole life insurance for children is low-cost life insurance that provides your children or grandchildren with benefits above and beyond what your own life insurance policy offers them.
Most parents or grandparents use whole life insurance as a way of gifting something other than taxable cash to children. While the tax advantages5 of the product are great for the giver, the future financial security is great for the child. That’s because whole life insurance for children6 is a policy that builds tax-free cash value. Another great benefit is that it guarantees their future insurability no matter what happens as they get older.
Riders for term and whole life insurance policies
Simply put, life insurance riders are add-ons to your policy that provide extra benefits to you and your family. Like adding cream or sugar to a cup of coffee, life insurance riders enhance your policy to increase protection and better fit your particular needs.
A life insurance expert can best help you strategize ways to get the most out of riders with minimal cost added to your policy. You can also check out our handy rider details page.
1Policy Form Series B-56. 2Policy Form Series B-52 & B-54. 3This is designed to provide general information on the subject covered. Pursuant to IRS Circular 230, it is not intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market or recommend any tax plan or arrangement. You are encouraged to consult your personal tax advisor or attorney. 4Loans will reduce your cash value and death benefit and may be subject to a surrender charge. Unpaid loans are subject to ordinary income tax and, if taken prior to age 59 1/2, a 10% federal tax penalty. 5More than half of all SBLI guaranteed level premium term life insurance applications, completed using our Accelerated Underwriting process, are issued in 15 days or less. According to the LOMA (Life Office Management Association) 2013 Individual Life STTA Report, the national average to issue a term life insurance policy is 30.1 days. 6Rider Form Series BC-40.1.