With the right life insurance policy, you can have peace of mind, knowing your loved ones will be taken care of financially if something happens to you. There are several different types of life insurance; how do you know which is right for you?

As experienced Philadelphia life insurance brokers specializing in health insurance and life insurance, we can help you choose a policy that makes the most sense for your situation. To help you get started, we’ve put together a definition of common life insurance terms, from term life insurance to final expense insurance.

What is term life insurance?

Term life insurance offers coverage for a set term. With this type of policy, you pay a fixed payment amount each month while the policy is in effect. Once the term is over, you no longer have coverage.

This type of life insurance is one of the most affordable types. It’s also straightforward. Term life insurance is suitable for someone who wants to ensure their family, such as any children or their partner, would have an ample financial safety net in place in the event of their death. Young parents, for example, would benefit from a policy that would last until their children become adults.

What is whole life insurance?

With whole life insurance, the policy lasts throughout your life. There’s no termination date like there is with a term life insurance policy. Another difference is the investment component – the cash value of your account will grow in a tax-deferred account at a fixed rate. If you ever need to, you can borrow against this accrued value or surrender the value for cash. While there is added flexibility, whole life insurance is more expensive.

Whole life insurance is a good option if you want to make sure your heirs have enough money to pay estate taxes. It’s also a good choice if you have a lifelong dependent such as a child with special needs.

What is index universal life insurance?

With this type of life insurance, the cash value of your policy is tied to a market index such as the S&P 500. So instead of earning a fixed rate of interest, the cash value grows along with the market. You don’t have to worry about losing money during market downturns, however, because the policy will come with a guarantee on the principal.

This is a good option for someone who wants the permanence of whole life insurance but is interested in greater investment potential.

What is long term care insurance?

This is a specific type of insurance that covers the costs of long-term care. Many families run into financial trouble when they have to cover the costs of putting a loved one in a nursing home or paying for in-home care.

Long term care insurance can protect your children or partner from having to deal with these sometimes incredibly high out-of-pocket costs if you need long-term care. This is a worthwhile type of insurance to look into if you have assets you want to be able to pass on to your heirs.

What is final expense insurance?

Final expense insurance can be used to cover costs related to your death, such as medical bills and funeral costs. If you don’t want your loved ones to have to cover these expenses, this is a type of insurance you may want to purchase in addition to life insurance.

What are living benefits?

If you want to be able to access some of your policy to pay for medical bills or other expenses in case you end up with a terminal illness, make sure your life insurance policy comes with living benefits. This may be a part of your base policy, or you can add it on at an additional cost.

If you have any questions about life insurance, how living benefits work, and which insurance companies may be a good choice for your needs, contact Michael Melle. We are Philadelphia life insurance brokers who can help residents of Pennsylvania, New Jersey, and Delaware access excellent insurance products.