Can you afford life and disability insurance?

The main benefit of this approach is that you'll have some coverage you can afford now rather than having to go without. However, there is a downside -- you may not be able to shorten the waiting period or lengthen the benefit period later should your financial circumstances change.

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Ask your insurance company about such issues before you decide on a policy, as some policies are more flexible than others.

4. Look for help from riders. Rather than choose between disability and life insurance, check first to see if either policy offers a rider -- an addendum that insurers use to expand your coverage -- usually for an additional fee.

"The best bet would be a life insurance policy with a disability rider or a disability policy with a life insurance component," Katz says. "You may be able to do a balancing act where the premium would be less but you do still have both disability and life."

Also, be sure to check with your home insurer to see if it offers a disability rider with your homeowner's policy.

You're not likely to get the same coverage or terms with a rider as you would with a stand-alone term life or disability policy, but it may be a cost-effective alternative to dropping one over the other.

5. Don't overbuy. It may be tempting to buy a lot of coverage -- but it also may be a mistake.

"People think they need a lot more life insurance than they do because they are using (insurance company) calculators that are geared to oversell," says Laurence Kotlikoff, a William Fairfield Warren professor of economics at Boston University who developed the ESPlanner financial planning software.

"Saying that you need 78 (percent) to 85 (percent) or even 100 percent income replacement is completely nuts."

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