Disability insurance complements health insurance by providing replacement lost income, in the event you become disabled and unable to work as a result of an accident or illness. 

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At age 40, the average worker faces only a 14 percent chance of dying before age 65 but a 21 percent chance of being disabled for 90 days or more. 

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Disability insurance helps to protect you or your family in just this event. 

There are three basic ways to replace income: 

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Employer-Paid Disability Insurance - This is required in most states. Most employers provide some short-term sick leave. Many larger employers provide long-term disability coverage as well, typically with benefits of up to 60 percent of salary lasting from five years to age 65, and in some cases extended for life.

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Social Security Disability Benefits - This can be paid to workers whose disability is expected to last at least 12 months and is so severe that no gainful employment can be performed.

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Individual Disability Income Insurance Policies - Other limited replacement income is available for workers under some circumstances from workers compensation (if the injury or illness is job-related), auto insurance (if disability results from an auto accident) and the Department of Veterans Affairs. 

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For most workers, even those with some employer-paid coverage, an individual disability income policy is the best way to ensure adequate income in the event of disability. When you buy a private disability income policy, you can expect to replace from 50% to 70% of income. Insurers won’t replace all your income because they want you to have an incentive to return to work. However, when you pay the premiums yourself, disability benefits are not taxed. 

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Benefits from employer-paid policies are subject to income tax. 

NOTE: Portions of the above information have been graciously provided by The Insurance Information Institute at www.iii.org/individuals