The good news is that these two types of insurance -- life and disability -- can guarantee that your family will be financially protected in the event of a calamity.
However, the bad news is that it's tough for most American families to afford both. As a result, some people may insure against one calamity and hope like crazy that the other one doesn't happen first.
"To say you're going to take one of them rather than the other, I can't get my arms around that idea," says Joseph Belth, professor emeritus at Indiana University's Kelley School of Business and author of "Life Insurance: A Consumer's Handbook."
"These are both very serious exposures," he says.
Odds that a 20-year-old worker will:
• Die before retirement: 16 percent.
• Become disabled before retirement: 30 percent.
Source: Social Security Administration/CDC
Recently, a handful of major insurers have begun tinkering with their term life products to develop affordable hybrid term life and disability insurance policies, or bundled packages aimed at the demographic most at risk: the so-called "middle market" Americans, ages 25 to 49 with $50,000-plus household income and less than $500,000 in invested assets.
The assumption is that if you're wealthier than that threshold, you're probably able to weather disruptions to your income stream without a disability insurance policy. And, if you fall short of that benchmark, you likely cannot afford the premiums.
Combining life and disability insurance is hardly a new concept. Belth estimates insurers have been offering whole life policies with disability insurance riders for 85 years. But the success of term life in recent years may give underwriters a new way to introduce disability coverage, a traditionally hard sell, into the equation.
It remains to be seen whether the new product can be offered at a price point acceptable to America's increasingly stretched middle-market demographic.
The knee bone's connected to the house note
Marianne Purushotham, research actuary with LIMRA International life insurance research consultants, has been studying the latest term/disability insurance hybrid products. So far, she has identified five companies that offer some form of this hybrid.
