1. Short-term disability covers a worker for up to a year. Typically, it's used for short-term illnesses, accidents, maternity leave or mental disabilities.
2. Long-term disability covers a worker for years — sometimes until Social Security kicks in. This is the most important type of disability insurance to have.
3. Residual or partial disability coverage allows an employee to work part time and still receive benefits to make up for lost income. Important but optional riders can provide for cost-of-living and future earnings increases.

Action Steps
The best contacts and resources to help you get it done

Tips & Tactics
Helpful advice for making the most of this Guide

• Disability insurance doesn't cover 100 percent of a salary. Insurers want people to have an incentive to go back to work. Most disability policies cover 40 percent to 80 percent of gross income.
• You can keep the cost of disability insurance down by electing a longer waiting period before benefits begin or shortening the benefit period. But remember, cost isn't everything. Getting the right coverage for your kind of business is key.
• Rehabilitation riders cover the cost of retraining. It's an option worth considering for yourself or your employees.
• Only the most expensive policies pay benefits until retirement. Two to five years is typical.
• If you pay disability benefits for an employee, he must pay federal and state income tax on those benefits, although paying these taxes for a disabled employee is a wonderful, and relatively common, gesture. Individual disability coverage is tax-free for the person paying the premium.
• If the policy is for you, you'll want a broad definition of disability. If you're buying the policy for a small company, a narrower definition will be the more affordable choice. The best option is "own-occupation disability," which pays benefits even if the disabled worker can do some other tasks. "Any-occupation disability" policies do not provide benefits unless you or your employees are totally unable to work.