Economic death: losing the ability to earn
Economic death occurs when a breadwinner loses the ability to earn. If the breadwinner’s risk has been transferred to an insurance company, the company pays a claim for this economic death or loss. The insurance company cannot replace a human being like it can a car or a building, but it can replace the dollars that he or she could have earned had there been no disruption.
A breadwinner dies during the earning period of life. All life insurance policies are designed to provide for the contingency of premature physical death (life insurance).
A breadwinner reaches retirement without accumulating adequate cash to provide for a reasonable retirement income. Not surprisingly, many more people experience retirement death than premature physical death. Some life policies can help accumulate the funds necessary to reduce the possibility of retirement death and many of the traditional retirement plans can be funded by products sold by life insurance companies (annuities — a way of purchasing a guaranteed income for life).
Living death (disability):
This sounds worse than death, and it probably is. If you are a single person and die, your income stops, but so do your expenses. It’s not a desirable state, but it does balance.
If you become disabled, you have not one problem but several. Your income stops, your normal expenses continue, and on top of it all you have a new layer of expenses in the form of medical bills. The two basic forms of health insurance are necessary to handle these problems. Disability income policies can replace lost income and medical expense policies can pay for medical bills.