Employee Matters

This column by Employee Compensation and Benefits Services addresses campuswide employment issues. Send your questions to: wisweek@news.wisc.edu.

“Everybody is ignorant, only on different subjects.”

— Will Rogers, U.S. humorist

This is the first of two articles about life insurance basics. This article discusses types of life insurance. The next will tell how to assess your individual needs and will include information about the different plans available through the university.

What’s life insurance?
Dictionaries define life insurance as “insurance that guarantees a specific sum of money to a designated beneficiary upon the death of the insured or the insured if he or she lives beyond a certain age.”

This concept seems easy to comprehend. Life insurance can be purchased to:

• Contribute to the financial security of surviving family members.
• Pay for final expenses such as a funeral.

Deciding whether you need insurance is relatively simple. However, there are different products designed to meet specific needs. Understanding the different types of life insurance, and deciding what is right for you, is more complicated.

What’s the difference between term and permanent types?
There are two basic types of insurance:

Term insurance provides a benefit for a specific period of time and has no cash value or savings features. The amount of coverage may be level, increasing or decreasing.

Term is usually less expensive than permanent insurance. Mortgage and credit insurance are two examples of decreasing term insurance.

All plans offered through university employment are a type of term insurance.

Permanent insurance such as whole or ordinary life, adjustable life and variable life insurance can be purchased from an insurance representative.

Permanent insurance types are not offered through your university employment.

What are riders?
Additional benefits are sometimes added to life insurance policies; these are called riders. For example, the State Group Life Insurance term policy has accidental death and dismemberment coverage added.

The university-offered Accidental Death and Dismemberment benefit supplements the basic death benefit when loss of life, dismemberment or loss of use of a limb or sight occurs as the result of an accident.

Some policies have living or accelerated benefits added. The State Group Life Insurance and Individual and Family Life Insurance have living benefits or accelerated benefits as part of the policies.

These features provide payment of benefits to the insured prior to death if catastrophic or terminal illness results in an insured requiring long-term care or confinement to a nursing home. Benefits may be used to help pay for costs of care or confinement.

Where can I get information?
Free publications may be obtained from:

• Consumer Information Center, Dept. WWW, Pueblo, CO 81009, “What You Should Know About Buying Life Insurance” (Publication 576JJ). Visit: http://www.pueblo.gsa.gov/acli/index.htm
• Wisconsin Office of the Commissioner of Insurance, P. O. Box 7873, Madison, WI 53707-7873, “Consumers Guide to Insurance” and “The NAIC Life Insurance Buyer’s Guide” (Publication LIG-LP1). Visit: http://oci.wi.gov/pub_list/pi-051.htm