LifeInsurancevsDisaiblityInsuranceLife insurance and disability insurance are both important types of insurance to consider, especially if you have family members who depend on your earnings. Consumers might want to consider weighing these two different forms of insurance to determine if they want to purchase just one or if the benefits to getting both outweigh the costs. It’s important to realistically assess your personal circumstances and future plans to find appropriate coverage.

What is life insurance?

Life insurance refers to an agreement with an insurance company where, in exchange for regular payments, the insurer agrees to pay a lump sum to surviving beneficiaries after the insured individual’s death.

A life insurance policy is generally purchased to financially protect dependents. Besides young children, the Insurance Information Institute (III) notes that life insurance beneficiaries can also include dependent adults, such as surviving spouses, siblings, and parents, or a selected charity. The proceeds can also go toward funeral and burial costs. Furthermore, some life insurance policies can create a cash value that can be borrowed.

The two basic types of life insurance are term and permanent life. Term covers the policyholder for a specified period—usually from one to 30 years—and can be renewed. If a term life policyholder dies within the coverage period, the beneficiary or beneficiaries will receive the benefits. If the policyholder lives past that period, the policy terminates.

The premium for term life is generally based on the policyholder’s age and health at the start of the policy, and it is fixed throughout the term. When the term expires, however, the rate could increase because the older you get, the greater the risk, according to the III.

Permanent life insurance covers the policyholder for as long as he or she lives, provided the premiums are paid. Permanent life insurance premiums are higher than term life premiums. The most common type of permanent life insurance is whole life, which also serves as a savings account.

What is disability insurance?

Disability insurance refers to a plan that provides for periodic payments of benefits when a disabled insured person is unable to work.

As with life insurance, there are two basic forms of disability insurance: short term and long term. Under short-term disability insurance, you receive your benefits sooner but for a shorter period of time, up to two years. With long-term disability insurance, the coverage can extend up to age 65—or even for a lifetime, under some policies.

Long-term disability policies are frequently offered as a benefit by medium-sized and large employers, but these are sometimes not as flexible or customizable as individual policies.

Are both life insurance and disability insurance necessary?

Life insurance and disability insurance policies cover vastly different things.

“You’re insuring for two different outcomes, so it’s not an either/or [choice],” says Greg McBride, chief financial analyst at financial information site Bankrate.

Some consumers, especially those who are young and first starting to purchase insurance, want to pick just one type of insurance. This is often because they only have the budget for one and are looking to find the insurance type that mitigates the most immediate risk.

If that is the case for you, disability insurance may speak to a more immediate need.

“Statistically, young people have a much greater chance of disability than premature death,” McBride says.

According to the Social Security Administration (SSA), 56 million Americans live with disabilities. The sobering fact for people as young as 20 years old, the SSA writes in an informational bulletin, is that more than one in four will become disabled before reaching retirement age.

Meanwhile, according to data released by the Centers for Disease Control and Prevention (CDC) in 2014, the most recent year for which data is available, life expectancy hovers between 70 and 76 years for men and between 77 and 81 years for women for those born between 1980 and 2010.

Keep in mind that though death may seem like a far-off possibility, opting for life insurance at a younger age can have a big impact on overall lifetime costs, says Steven Weisbart, senior vice president and chief economist at the III.

“The younger you start, the lower the premium will be,” he says. “Age is an ingredient in the price.”

There are also options, such as riders and addendums (add-on polices that can be purchased separately, in addition to an existing coverage plan), that can help keep premium costs down while offering greater peace of mind. Insurance companies may offer some flexibility with the policies they offer, so be honest about your financial status and plans when shopping around for free quotes from insurance professionals, Weisbart says.

Jane Huh is a freelance writer with a background in journalism. Throughout her 10 years of reporting experience, she has written for news media outlets including the Daily Herald, The Indianapolis Star and Copley Newspapers.