Disability and Life Insurance: Just in Case Police officers wear bulletproof vests, welders don masks, and racecar drivers wear helmets. Almost every profession has equipment to protect you while you're on the job. Life-insurance and disability-insurance policies also protect you, but instead of safeguarding your body while you work, they protect your money in case you are no longer able to earn a salary. Disability insurance pays benefits to you if you are no longer able to work due to a disability and—as a result—won’t be able earn a salary or save for retirement. What's more, you might have to dip into the savings you'd set aside for your retirement or your kids' education just to get by. That means your retirement plans could be severely set back. Unfortunately, a lot of people become disabled during their working years. According to the Social Security office, a 20-year-old worker has a 3-in-10 chance of becoming disabled before reaching retirement age. Life insurance is also important. If you die, your family will no longer be able to rely on you as a source of income. They could have real trouble paying off loans and bills, not to mention funeral costs. When deciding on a life-insurance policy, you first want to think about how the insurance payment will be used. Would you like to pay off the mortgage with it? Your kid's college expenses? Will the payment need to support a spouse? Weigh these future costs against how much you'll have to pay every month for the policy. Next, think about what type of insurance you want. You can choose between temporary (term) and permanent (whole) life insurance. Use the table below to see which kind of policy is best for you. You also may want to talk to a financial advisor or life insurance agent about the various options that are available to you.								> Home > Glossary > Support

Term Life Policy

Advantages Lower costs than whole life.   Provides coverage only for the term of the policy.   Pays your heirs a guaranteed fixed amount when you die.

Disadvantages Premiums increase as you get older.   If you still need insurance after your term ends, you may need to buy a new policy, probably at a higher cost.   Doesn't build cash value, unlike whole life.

Who should use it Good if your situation will change at a fixed point in the future—for instance, if your kids will be taking care of themselves, or your mortgage will be paid off.

Whole Life Policy

Advantages The cost of your premiums is fixed.   Provides permanent coverage until you cancel the policy or die.   Pays your heirs a guaranteed fixed amount when you die.   Part of your premium goes into a cash value account you can borrow against, or even take, should you cancel the insurance.

Disadvantages Premiums are more expensive than term life insurance.   Coverage generally stays the same even if your needs change.

Who should use it Good if you need a forced-savings plan, or if your needs won't change—for instance, if you will always have to support a child or spouse.

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