(MONEY Magazine) – Contrary to what life insurance agents may tell you, the coverage you need most isn't whole life, universal life, variable life or even universal variable life. It's disability income insurance. This often overlooked coverage pays you a monthly income if you are unable to work because of injury or illness. Statistics show that disability is far more probable than death, especially if you are young or middle-aged. At age 42, for example, you are about four times more likely to be disabled for at least three months before retirement than you are to die. In fact, disability is sometimes called ''living death,'' since your family's financial needs continue but you can't meet them unless you have insurance. Unfortunately, there are plenty of temptations to put off obtaining coverage. It is expensive: the premium on an individual policy offering a $2,200-a-month benefit for a 40-year-old, nonsmoking manager could run as high as $1,459 a year (see the table below). Also, you may mistakenly think you are fully protected by Social Security and possibly by your employer's group disability policy. But Social Security's disability criteria are so strict that only about 35% of those who apply for benefits actually qualify for them. And even if your employer offers insurance -- as do 99% of large companies but less than 25% of businesses with fewer than 50 employees -- there may still be holes in your coverage. Some group policies don't cover you until you have worked for your employer for a year or two; others limit benefits to $2,000 a month. You can learn these details from the summary that federal law requires your employer's benefits administrator to make available. If your group plan seems skimpy, you can supplement it with an individual policy. How much coverage do you need? In general, insurance experts recommend that disability insurance equal 60% to 70% of your before-tax earnings, with benefits starting 90 days after you become disabled (your savings presumably can carry you until then) and continuing if necessary until you reach age 65. You probably cannot buy much more insurance than that anyway. To avoid attracting phony claims, most insurers will cover you only to the point at which your disability income from all sources, including Social Security and company benefits, would equal 70% of your current before-tax earnings. Still, that's better than it sounds. Benefits from a policy you buy with after-tax dollars -- in contrast to income from a policy paid by your employer -- are tax-free. Equally important as the amount of coverage is the way your policy defines disability. Under the most generous definition, known as ''own occ,'' insurers agree to pay full benefits if you can't work in your own occupation as long as you are under a physician's care. In contrast, a policy using the narrower ''any occ'' definition would pay only if you are unable to work in any occupation for which you are clearly suited. Under the any-occ rubric, for example, a practicing lawyer would not lose his benefits if he refused to work as, say, a taxi driver. But they would be cut off if he could teach law and declined, even if teaching would pay him an inadequate salary. Insurers commonly compromise by splitting the definition and paying benefits under own-occ rules for the first one to five years of a disability and under any-occ rules thereafter. Not surprisingly, pure own-occ policies -- which often have other desirable features -- are 5% to 15% more expensive. ''I suspect that a lot of people choose own-occ out of ego,'' says Washington, D.C. financial planner Andrew Gross. ''But in many jobs it makes more sense to spend your premiums on higher monthly benefits.'' The most expedient way to minimize the cost of your coverage is to prolong the so-called elimination period -- the time you have to wait for benefits to begin after you become disabled. A 40-year-old nonsmoking manager would pay as much as $400 a year in additional premiums if he took a 30-day waiting period rather than the more usual 90-day wait. Savings are less dramatic for longer waits: stretching from 90 days to 180 would typically cut premiums only about $100 a year. Most financial advisers recommend that you choose a policy that stops paying benefits at age 65, because pension and Social Security retirement benefits kick in at that age. For premiums about 20% higher, you can select a benefit period that continues until you die. Such a policy would make sense if you are young and there is a possibility that a long-term disability would prevent you from building retirement benefits. As with their other products, insurers tend to offer lots of options on disability policies. The most valuable (often standard in a top-of-the-line policy) is a residual-benefits provision, which may add 20% to 25% to your premium. This option supplements your income if you are well enough to go back to work but not yet healthy enough to work at full capacity and earn full pay. Read your contract carefully, though. Some less generous policies pay so- called partial benefits -- usually 50% of your full benefit -- if you are partially disabled. Unlike residual benefits, which continue as long as needed, partial benefits typically terminate after three to six months. Another valuable option is a cost-of-living adjustment (COLA), which will boost your premium 25% or so. With this rider, monthly benefits increase automatically to counter inflation, rising either at a specified rate or at the same rate as the consumer price index, up to a specified annual maximum. Finally, you should insist on a policy that is at least guaranteed renewable, which means that the insurer cannot cancel your coverage as long as you pay your premiums or raise your premium unless it boosts premiums in general. A preferable alternative -- characteristic of the policies in the table on page 78 -- is a noncancelable policy, which guarantees that your policy cannot be revoked and that your premium cannot be increased at all.

BOX: HOW TOP POLICIES COMPARE This table shows the annual premiums for disability policies that would pay a 40-year-old, nonsmoking manager $2,200 a month if the person could not work in his or her own occupation because of illness or injury. The tax-free payments begin after a waiting period -- typically 90 days -- and continue until age 65, if necessary. Premiums are higher if benefits begin after a 30-day waiting period. Some policies charge extra for residual benefits, which are payments for partial disability. Premiums are also higher if the policy includes a cost-of-living adjustment (COLA); prices in that column are for policies adequate to offset 6% inflation. The maximum benefits are based on a salary of $40,000 a year.

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