What is the Most Important Insurance in Pennsylvania?

Insurance provides financial protection or compensates a person for unexpected losses, damages, illnesses, or death. It also protects you from liability claims for damages or injuries caused to third parties. When purchasing insurance in Pennsylvania, ensure you get coverage that fits your needs and budget.

Speak with a knowledgeable Pennsylvania-licensed insurance agent who can help you select a policy that best suits your needs and budget. The agent will review your insurance needs and communicate the available policies to you. Insurance agents can also recommend how you can bundle different insurance policies to enjoy multi-policy discounts from your insurance company.

According to the Hierarchy of Insurance Needs, health insurance is the most important insurance for everyone.

The Most Important Insurance in Pennsylvania:

HEALTH INSURANCE

Pennsylvania’s seven leading causes of death are heart disease, cancer, unintentional injuries, stroke, chronic lower respiratory disease (CLRD), Alzheimer’s disease, and diabetes. These diseases account for approximately 66% of all deaths that occur yearly in the Commonwealth. Individuals with these conditions and without health insurance might incur high medical bills that can force them into debt. Hence, the need for health insurance coverage that can cover such conditions. Health insurance is a type of insurance that covers medical expenses like hospitalization costs, the cost of medicines, or doctor consultation fees.

Why Do you Need Health Insurance?

In 2020, more than 155,000 deaths were recorded in Pennsylvania. Some of these deaths were due to health issues like disease of the heart, malignant neoplasms, cerebrovascular disease, chronic lower respiratory disease, and diabetes mellitus. That same year, about 10% of Pennsylvania adult residents between 18 and 64 years old lacked health insurance coverage, 15% did not have a personal health care provider, and 10% needed to visit a doctor in 2019 but could not due to cost. In 2022, an estimated 957,632 Pennsylvania residents under 65 years (including children) were without health insurance. Not having access to health coverage can result in expensive medical bills or avoiding necessary medical care. Health insurance provides essential health benefits and medical care for accidents and illnesses.

In Pennsylvania, you need health insurance because:

• You need financial backup in times of medical emergencies

• It serves as a safety net for you and your loved ones by covering medical bills you might not be able to pay on your own

• It can prevent you from getting sick because it is easier for you to access routine and preventive health care like vaccinations, scans, screenings, immunization, annual checkups, blood tests, and lab work

• It covers hospitalization, specific prescription drugs, emergency services, preventive services, mental health and substance use disorder services, wellness services, laboratory services, and pediatric services

However, health insurance in Pennsylvania excludes cosmetic surgeries, beauty treatments, infertility/pregnancy-related conditions, off-label drug use, or diseases related to overconsumption of alcohol. Discuss with a licensed health insurance agent who can help determine your health insurance eligibility and find a plan that suits your needs.

The 2nd Most-Important Insurance

Going along the Hierarchy of Insurance Needs, the 2nd most important type of insurance in Pennsylvania is property and liability insurance. This insurance group is for homeowners, renters, and business owners alike.

PROPERTY and LIABILITY Insurance: Personal and Business

Property and liability insurance protects your properties (both residential and commercial) against loss or damages. It also includes liability coverage that protects you against claims due to property damage or accidental injuries sustained by third parties on your residential or business property.

AUTO INSURANCE

In Pennsylvania, auto insurance protects you against financial losses if you are in an auto accident. A typical auto insurance policy in Commonwealth provides the following coverages:

• Medical benefits: Medical bills resulting from injuries sustained by you or others who are covered by your policy during an accident, regardless of fault

• Property: Damage to your vehicle and the other party in an accident or theft of your vehicle

• Liability: Bodily injuries and property damage sustained in an accident

Auto insurance in Pennsylvania does not cover regular repairs and general maintenance on your car, damages caused by wear and tear, and personal belongings stolen from your vehicle. Pennsylvania drivers must carry a minimum of $5,000 in medical benefits, $15,000 (per person) or $30,000 (per accident) in bodily injury liability, and $5,000 in property damage liability. Some insurance companies offer a combined limit of $35,000 for bodily injury and property damage liability coverage. Asides from the required minimum coverages, Pennsylvania drivers may also get additional auto coverages like:

• Uninsured motorist (UM): This covers you, your loved ones, and your passengers if injured in a car accident by an uninsured at-fault driver or hit and run driver. It does not cover property damage

• Underinsured motorist (UIM): This covers you, your loved ones, and your passengers if injured in a vehicle accident involving an at-fault driver who does not have enough insurance to pay your claim. UIM typically excludes property damage

• Funeral benefit: It covers funeral expenses if you or your loved ones (those covered by the policy) die in an auto accident, regardless of who was at fault in the accident

• Income loss: Pays a portion of your lost wages when you can not work due to injuries sustained in an auto accident

• Collision: Pays to repair damage to your vehicle due to an accident

• Comprehensive: Pays for theft or damage to your car caused by perils like fire, flood, vandalism, and striking an animal

Discuss with a licensed auto insurance agent in Pennsylvania who can assist you in getting the right insurance coverage for your vehicle. They can also help you get auto insurance quotes from multiple insurers to get the best coverage that suits your needs at an affordable price.

Why Do you Need Auto Insurance in Pennsylvania?

As of 2020, about 10,690,187 motor vehicles were registered in Pennsylvania, which included 4,043,715 automobiles, 55,267 buses, 6,230,712 trucks and 360,493 motorcycles. That same year, there were 104,475 reportable traffic crashes in the state, which claimed the lives of 1,129 people and injured another 61,248 people. In 2021, there were 12,126,271 registered devices of various categories with active registration in the Commonwealth, passenger cars accounted for over 8.1 million of them.

Pennsylvania law mandates drivers to carry proof of up-to-date insurance whenever they drive. Driving without auto insurance can attract a minimum fine of $300 and a three-month suspension of your vehicle registration/driver's license. Besides getting penalized for lack of auto insurance, it is important to have auto insurance in Pennsylvania because:

• Your lender might require it before you can receive a car loan

• It can compensate others for accidents caused by you

• It can compensate you for accidents caused by third-parties

• It can cover your passengers if you get involved in an accident

• It can protect your family members who are included in your policy

• It can bring peace of mind to everyone

In Pennsylvania, you need car insurance because:

• You own a car

• You allow others to use your car

• Your lender requires it

• It facilitates peace of mind

RESIDENTIAL INSURANCE

As of July 2021, Pennsylvania had a population of 12,964,056 with more than 5.7 million housing units. In 2020, about 69% of the housing units in Pennsylvania were owner-occupied, and 31% were available for rent. Pike County has the most owner-occupied housing units at about 84.3%, while around 15.7% are occupied by renters. Meanwhile in Philadelphia County nearly 47% of its housing units are rentals.

Over 5 million housing units in Pennsylvania need insurance coverage. At a minimum, all owners of these properties should have homeowners insurance coverage, condo insurance, and/or business property insurance (for apartment complexes) to protect their financial investments from possible losses or damages.

Residential insurance covers damages to a building, whether owner-occupied or rented. The insured dwelling may be built, manufactured, or mobile. Some common types of residential insurance you will find in Pennsylvania are:

• Homeowners insurance

• Renters insurance

• Condo insurance

• Landlord insurance

Most residential insurance does not cover damage caused by earthquakes and flooding. Such disasters are covered by a separate policy called disaster/catastrophe insurance which comprises different insurance policies like earthquake insurance and flood insurance. You can add disaster insurance as riders to your existing residential insurance policies to have more comprehensive coverage or purchase it as a separate policy depending on your coverage needs.

HOMEOWNERS INSURANCE

Homeowners insurance protects you against financial loss if there is damage to your home and your personal belongings like furniture, appliances, rugs, and clothes. It also provides liability coverage for medical and legal fees if someone gets hurt in your home or on your property. Most homeowners insurance in Pennsylvania does not cover damages caused by smoke from agricultural smudging or industrial operations, earthquake, mold, fungus, flood, wet rot, wear and tear, mechanical breakdown, smog, rust, and corrosion. It also excludes damages caused by birds, rodents, insects nesting or infestation, or discharge or release of waste products or secretions by any animal or animal owned by an insured.

Ensure you shop around and compare homeowners insurance quotes from multiple insurers so you can save on your homeowners insurance premiums. You can ask a local agent to help with that. A typical homeowners insurance policy in Pennsylvania provides:

• Dwelling coverage: Covers damages to your house and structures attached to it

• Other structures coverage: Covers damages to detached structures in your house like garages, sheds, fences, and guest houses

• Personal property coverage: Covers damage to or theft of your personal possessions like furniture, appliances, electronics, lawn equipment, and clothing. It also covers personal belongings not kept on your property

• Loss of use coverage: Covers additional living expenses if your home becomes uninhabitable due to a covered loss

• Medical payments: Pays for medical bills for people hurt on your property or hurt by your pets. Note that home insurance policy does not cover injuries sustained by your pets; that is covered by pet insurance

• Personal liability: Protects you and covered relatives (under the age of 21) if sued by third parties for property damages or bodily injuries on your property for which you are legally responsible

There are several types of homeowners insurance policies in Pennsylvania:

• Homeowners basic form (Form 1)

• Homeowners broad form (Form 2)

• Homeowners special form (Form 3)

• Homeowners comprehensive form (Form 5)

• Modified coverage form (Form 8)

Discuss with a Pennsylvania-licensed property and casualty insurance agent if you are not fully certain about the right homeowners insurance coverage to get. They will help you compare homeowners insurance quotes from multiple insurers in a bid to find a policy that will suit your insurance needs. Insurance agents can also provide answers to your homeowners insurance questions.

In Pennsylvania, you need homeowners insurance policy because:

• You own a home: Homeowners insurance covers your house, detached structures, personal belongings, and helps to provide liability coverage for accidental injuries sustained by third parties on your property

• Your mortgage lender requires it: Your mortgage lender may want you to get a homeowners insurance as a condition of your mortgage agreement. They may also require you to name them on your homeowners policy as the lien holder and the additional insured

RENTERS INSURANCE

Renters insurance is commonly known as Contents Broad Form (Form 4) policy in Pennsylvania. It protects renters and their personal belongings from damages, theft, and liabilities. For instance, if burglars break into your rented apartment and steal your personal belongings, your renters insurance will cover the replacement cost. Renters insurance can also protect you from lawsuits if someone sustained bodily injury or suffered property damage while in your rented apartment. Additionally, it covers your personal belongings even if you are not at home. For instance, it can provide coverage if your laptop was stolen at the salon or you lose your luggage while traveling. On average, renters insurance is mostly affordable, and most policies cost between $15 and $ 30 per month. In addition, most insurers can allow you to bundle your policy with other insurance policies to save on premium cost.

You need renters insurance in Pennsylvania because:

• You are a tenant: Your landlord's homeowners insurance does not cover your belongings. Hence, if you live in a rented dwelling or you are a college student who lives in a dorm, you should consider getting renters insurance. It can protect you against financial loss due to personal liabilities and belongings lost to covered perils. It can also pay for your temporary living expenses if a disaster displaces you from your rented apartment

• Your Landlord requires it: Most landlords in Pennsylvania require tenants to carry renters insurance to alleviate their liability for personal property losses and any accidental injuries sustained by third parties in their tenants’ apartments

CONDO INSURANCE

The condominium association’s policy primarily covers common areas like land, hallways, and other shared areas of condominiums. However, it excludes each condominium unit and everything in it. Condo insurance is known as the Unit-Owners Form (Form 6) in Pennsylvania. It is typically designed for condominium owners and offers coverage similar to that provided to homeowners with the Broad Form. In addition, condo insurance helps to cover the interior of a condominium unit.

You need Condo insurance in Pennsylvania because:

• You own a condo: Condo insurance ensures you are covered when damages or liabilities occur in your condo

• Mortgage lenders need it: Mortgage lenders will require condo owners to purchase condo insurance to protect their (lenders) investment. They want to make condo owners get sufficient protection so they do not lose out if anything bad happens to the home

LANDLORD INSURANCE

With more than 1.7 million housing units in Pennsylvania as rental units, landlords need landlord insurance to cover their properties (investments) from the possible liability claims arising from tenants and their guests. As a landlord, you will need protection from financial loss resulting from theft, fire outbreak, or severe weather that can damage your rental property. Landlord insurance provides coverage for the dwelling, personal property, and accidents and injuries that occur on rental property premises.

You need Landlord insurance in Pennsylvania if:

• Your lender requires it: If you have a mortgage or financing a rental property, your lender may want you to purchase landlord insurance. This is because your lender has a financial stake in your property so they want to make sure it is protected

• You own a property that you have rented to tenants: Having a landlord insurance helps you protect your asset against unpredictable events like fire, vandalism, and hail. Regular homeowners insurance is not sufficient for a rental property.

COMMERCIAL INSURANCE

In 2022, Pennsylvania was home to 1.1 million small businesses employing 2.5 million individuals, while the total workforce between businesses of all sizes exceeded 5.6 million jobs. Commercial insurance can protect these employers and their employees against financial losses arising from insurable perils.

Commercial insurance, commonly known as business insurance, helps protect businesses in Pennsylvania against financial losses due to client lawsuits, customer or employee injuries, property damages, business interruptions, and business-related crimes. Commercial Insurance typically covers damages done to your business property. It also pays for the cost of liability claims brought against your business due to accidental injuries sustained by third parties on your business premises.

Reasons you need commercial insurance in Pennsylvania include:

• It protects your business from property damages and liability claims

• It protects and provides benefits to your employees

• It protects against natural disasters like hail and windstorm

• It facilitates employees retention

• It builds business credibility and can facilitate contract brokering

• It protects your customers

• It offers peace of mind

You need business insurance because::

• You own or rent office space: Commercial insurance helps to protect your business and its content in the event of accidents or tragedies like theft, fire, and wind damage. Your landlord will likely require you to have commercial insurance if you operate out of a rented space. Also, lenders will require commercial insurance from business owners who have business loans

• You own commercial property: You should get commercial insurance if you have valuable equipment on your business premises

• You have employees: Businesses with employees should consider getting commercial insurance to cover business-related crimes perpetrated by employees and work-related injuries sustained by them

DISASTER INSURANCE

Pennsylvania is prone to natural disasters like floods, severe storms, tropical storms, winter storms, tornadoes, landslides, wildfires, and earthquakes. According to the Insurance Information Institute (III), Pennsylvania had 1,350 wildfires in 2021. As of 2022, about 1.9 million single-family structures in the Philadelphia metropolitan area were at risk of hurricane wind, with an expected reconstruction cost value of nearly $763 billion. Also, 59,237 multi-family structures faced similar risks with a potential reconstruction cost of over $34 billion. That same year, about 3,449 multi-family structures in the Philadelphia metropolitan area were at risk for hurricane wind, with a reconstruction cost value of over $1.5 billion. Therefore, having disaster insurance in the Commonwealth to protect against prevalent natural disasters cannot be over-emphasized.

Disaster insurance protects residences and businesses in Pennsylvania against natural disasters (floods, storms, tornadoes, sinkholes, landslides, wildfires, and earthquakes) and man-made disasters (riots or terrorist attacks). Most disaster insurance policies cannot be bought separately because they usually come as add-ons to existing standard property insurance policies. The types of natural disaster insurance policies available in Pennsylvania include:

• Flood insurance: Most home policies in Pennsylvania do not cover damages caused by flooding. Hence, you should get a separate flood insurance policy for coverage. Flood insurance covers damages to residential and commercial properties due to flooding. Flood insurance policies are provided through the National Flood Insurance Program (NFIP), but you cannot buy flood insurance directly from them. You can only purchase it through a state-licensed property and casualty insurance agent and private insurers (including surplus lines insurers). Flood insurance issued by NFIP does not cover personal automobiles damaged by flood, personal belongings, and properties outside the insured building, or additional living expenses. Flood insurance covers the physical structure of your home and its foundation, detached structures like garages, and essential systems in the home like plumbing and electronic systems, water heaters, and central air conditioners. It also covers personal belongings like furniture, clothing, portable appliances, electronics, and valuables like art

• Earthquake insurance: It provides coverage for properties damaged by earthquakes. Unfortunately, most homeowners and renters policies do not include earthquake damage. Earthquake insurance covers repairs for earthquake damages, the cost of removing debris, and additional living expenses if you have to temporarily relocate while your home is being rebuilt or repaired. It excludes water damage, fire damage, sinkholes, and damage to cars. These damages are covered under flood, homeowners, sinkhole, and automobile insurance policies, respectively

• Mine subsidence insurance: Pennsylvania has a long history of clay and coal mining, such that millions of buildings in the state are located over old, abandoned underground clay and coal mines. These mines can deteriorate and collapse, resulting in sinkholes and other earth movements that can cause damage to buildings. Most homeowners insurance policies do not cover damages caused by subsidence or mine water breakouts. You would have to get mine subsidence insurance to cover such damages. Mine subsidence insurance covers losses caused by earth movements that result from the collapse of underground coal and clay mines in the Commonwealth

You can find the address of your property in the FEMA Flood Map Service Center to know the flood risk level of your locality and the minimum floodplain standards in your community. You can also check the Pennsylvania Department of Environmental Protection to know if your home is sitting on top of an abandoned mine. Speak to a licensed insurance agent in your locality for more information regarding disaster insurance. They should be able to recommend a suitable policy based on the prevalent natural disasters in your locality. You can get your disaster insurance policy from your homeowners insurance company to benefit from multi policy discounts.

You need disaster insurance because:

• You reside, or your business is located in high-risk areas: Get a disaster insurance policy to protect you and your residential and commercial properties if you live or do business in areas prone to natural disasters like Warren, Bradford, Wilkes Barre, Johnstown, York, Connellsville Lancaster, and Westmoreland Counties. Note that you can buy disaster insurance even if your home is not located in high-risk counties

• You have homeowners insurance: Most homeowners insurance policies in Pennsylvania exclude damage and destruction from earthquakes, floods, tsunamis, or extreme storms. You get disaster insurance to cover such natural disasters

• You have commercial property insurance: Most commercial insurance policies in Pennsylvania exclude damages caused by natural disasters like floods and earthquakes. Purchasing disaster insurance can help cover your business from damages caused by such disasters

• Your lender requires it: Your mortgage lender may want you to purchase disaster insurance as a condition of your mortgage agreement

3rd Most-Important Insurance - Life Insurance:

Life insurance can be divided into two main usage types:

• Living benefits: This allows you to enjoy some benefits while still alive

• Death benefits: This is the payout your policy beneficiaries will receive from your insurers at your demise. However, some insurers may allow you to use the death benefit if you need to pay for medical bills when you are terminally ill

Life insurance is further divided into two sub-groups:

• Basic life insurance: Provides coverage for end-of-life expenses like medical bills, burial, or cremation

• Financial security (or legacy) life insurance: This is the death benefit paid to the policy beneficiary after paying the insured’s final expenses

LIFE INSURANCE

As of July 2021, Pennsylvania had a population of 12,964,056, with more than 2.4 million adults aged 65 years or older. With Pennsylvania’s aging population and improved longevity, the burden of chronic diseases like heart disease, cancer, stroke, Alzheimer’s disease, and diabetes, and the associated costs are both likely to increase. These chronic diseases are the leading causes of death in Pennsylvania.

On average, 134 thousand Pennsylvanians die every year. Senior residents over 65 years old typically comprise the largest segment (≈75%) of those who pass away. In 2020, due to the COVID-19 pandemic, the number of deaths in the state jumped up by nearly 20,000, to 155,551, with the growth in deaths mostly reflected among the seniors population. 121,288 (>77%) of the deceased were over 65 years old. These deaths were mostly caused by health issues, accidents, assaults, and intentional self-harms.

Life insurance provides a death benefit to your policy beneficiaries at your demise. It ensures that your loved ones have the financial resources needed to maintain their lifestyles. There are two types of life insurance policies in Pennsylvania:

• Term life insurance: This type of life insurance offers coverage for a set period (term) of one or more years. Term life insurance policy pays death benefits only if you die during your policy’s term

• Permanent life insurance: This type of life insurance provides lifelong coverage. Some permanent life insurance policies build cash values alongside lifelong coverage. Examples of permanent life insurance policies are whole life, final expense, universal life

Life insurance typically covers deaths caused by old age or illnesses known to the insurer, accidents, suicide (if it occurs within two years after purchasing the policy) and homicide (except the policy beneficiary is involved in the murder). Life Insurance coverage typically excludes accidental death due to intoxication or drugs, death caused by the insured’s involvement in criminal or illegal activity or frequent participation in dangerous activities like hand-gliding, skydiving, paragliding, and bungee jumping. It does not cover death caused by self-inflicted wounds and suicide committed two years after puchasing the policy.

Major reasons to purchase life insurance in Pennsylvania are to:

• Financially protect your family after you die

• Have tax-free retirement income

• Have a cash value component that you can withdraw from, borrow against, or use to pay premiums while still alive, depending on life insurance type

• Replace your income and provide for your family when you pass away

• Pay outstanding debts

• Cover funeral and burial expenses

• Pay for your children's college tuition fees

• Serve as a financial investment

• Fund business or partnership buyouts in the event of one of the business owners’ demise

You need life insurance if:

• You want living benefits: This will give you access to money from your life insurance policy while still alive

• You are an older adult without savings: Older adults without savings can get life insurance policies like final expenses to cover funeral and business expenses

• You have dependents: Getting life insurance is a good idea if you have loved ones who depend on you. This will ensure they do not suffer financially at your demise. Life insurance coverage will help cover household expenses like mortgage, food bills, college tuition fees, and funeral costs

• You own a business: Having life insurance helps to keep businesses afloat at the demise of the key person of the organization. For instance, employers can use death benefits from life insurance to pay creditors and recruit new top executives if anything happens to the business owner. Also, life insurance can be used as part of a buy and sell agreement where business partners can use payouts to purchase the deceased owner’s share of the business

Basic Life Insurance to Cover Final Expenses and Burial

The basic life insurance policy that covers funeral costs and other end-of-life expenses in Pennsylvania is known as final expense (FE) life insurance.

Why Do I Need a Basic Life Insurance Policy for Final Expenses?

More than 2.4 million Pennsylvania residents are over 65 years and they suffer from critical health issues like heart diseases and cancers which can make it difficult for them to get conventional life insurance. However, they can get basic life insurance policies for final expenses regardless of their age and health status. A basic life insurance policy for final expenses will cover final medical bills, burial expenses, and other end-of-life expenses at an insured’s demise.

You need basic life insurance when:

• You want to prepare your loved ones for your demise by ensuring they do not bear the burden of paying burial costs and other end-of-life expenses

• You want your loved ones to be able to pay outstanding debts incurred during your lifetime, such as mortgage, auto loans, and credit cards

Cost of End of Life Expenses in Pennsylvania

The cost of end-of-life expenses in Pennsylvania is based on several factors like transportation of the deceased, dignified care of the deceased, services selected, and funeral merchandise. Below is the breakdown of the cost of some funeral items in Pennsylvania:

• Basic services: $2,290 - $3,995

• Embalming: $625 - $995

• Transportation of remains: $350 - $625

• Casket/alternative container: $2,000 - $14,000

• Facility/staff use: $350 - $1,250

• Outer burial container: $975 - $10,750

• Direct cremation: $2,425 - $3,225

• Direct/immediate burial: $2,925 - $3,995

Average Cost of Funeral in Pennsylvania

The average cost of a funeral in Pennsylvania is between $3,300 and $13,700. This price can vary depending on your city or county, insurer, and elected services. For instance, the average cost of a funeral in Bucks County is $11,600 and $4,700 in Clinton County. The best way to reduce the financial stress on your family when you die is by putting measures in place to cater to your funeral cost. Get the following life insurance policies to help cover your funeral, memorial service, embalming and other final expenses:

• Term Life insurance

• Final Expense insurance

These life insurance policies are less expensive than other life insurance policies like whole life and universal life insurance that have cash value components. However, whole life and universal life insurance policies are very good for individuals who want to leave substantial money behind that goes beyond catering for funeral expenses or building cash values to fund a tax-free retirement. Speak with a Pennsylvania-licensed life insurance agent to discuss the possible coverage options and costs. An agent will help you determine the life insurance type that suits your needs.

Most Common Types of Life Insurance in Pennsylvania are:

• Term Life

• Final Expense (FE), and

• Indexed Universal Life (IUL)

Term life insurance: This is a life insurance type that covers you for a specific period. It pays a death benefit only if you die during that term. If you outlive the policy, no death benefits will be paid. Most times, you can renew your term life policy for one or more additional terms regardless of your health status. However, this can lead to an increase in premium because of aging which typically increases the risks an insurer will bear. You can also convert your term insurance policy before the end of the term for a permanent life policy regardless of your health status. However, this also comes with higher premium charges. Insurers in Pennsylvania calculate term life insurance premiums based on age, gender, health history, occupation, and tobacco use. When purchasing term life insurance, you can choose between level term and decreasing term:

• Level term: This is a type of term life insurance where the premiums and death benefit amount remains constant throughout the policy term, regardless of when the insured passes away

• Decreasing term: This is a type of term life insurance in which the death benefit amount decreases monthly or annually until the end of the term

Final Expense (FE) life Insurance: This type of permanent life insurance is also called funeral insurance, simplified issue whole life insurance, burial insurance, or modified whole life insurance. FE policy helps older adults ease the burden of end-of-life expenses on their loved ones by covering funeral costs and other final expenses after their demise. FE life insurance does not expire, and no medical exam is required. Insurers calculate FE premiums based on age, gender, and overall health. There are two types of FE in Pennsylvania:

• Guaranteed issue: This type of FE life insurance is good for older adults with health issues because it does not require medical questions or exams for approval. Also, your policy application will not be declined or turned down regardless of your health status. Generally, guaranteed issue FE life insurance offers low death benefits with high premiums

• Simplified issue: This type of Final Expense life insurance is best for people with relatively good health who may not be eligible for conventional life insurance coverage but want a policy that can cover end-of-life costs. Insureds are not required to take medical exams but might have to answer a few health questions. Simplified issue FE life insurance coverage availability is low, and premiums are relatively high.

Indexed Universal Life (IUL) Insurance: This type of permanent life insurance has a cash value component that helps you use the policy to create a tax-free retirement income stream as a living benefit. The cash value portion is tied to a market index that grows tax-deferred. Purchasing IUL at a young age allows you to grow your cash value longer and enjoy the benefits of the accumulated funds at retirement. Policy beneficiaries can use the death benefits obtained from the IUL policy to cover medical expenses, funeral expenses, paying off debts, daily needs, and paying college tuition fees. While alive, an insured can use the cash value component as tax-free retirement income. In addition, you can use the money in your IUL cash value account to pay premiums, supplement retirement income, and earn interest that you can withdraw or borrow against for an emergency.

Asides from the death benefits that come with life insurance policies, you can also access living benefits, depending on the insurance type. Living benefits allow you to spend out of your death benefit while still alive. However, accessing living benefits reduces the death benefit your policy beneficiaries will receive after your demise. Living benefits are very common with IUL policies, and the money paid out can be used to take care of health issues that come with old age. Common living benefit riders in Pennsylvania include:

• Accelerated death benefit (ADB)

• Accidental death rider

• Critical care illness rider

• Family income rider

• Long-term care rider

• Terminal illness rider

• Tax-free retirement income

If you have a terminal illness and you have a matching living benefit rider with your life insurance policy, you might be able to get up to 25% of the death benefit. For example, on a $3,000,000 life insurance policy, you can get $750,000 from your death benefit while still alive. You can use the living benefit to meet medical costs and other critical needs.