This overlooked insurance policy could help you stay financially afloat if you couldn't work

How would you support yourself or your loved ones if you couldn't work due to an injury or illness?

A majority of respondents said they'd dip into financial reserves or borrow, according to a study by LIMRA, a trade organization representing insurance and financial companies, and life insurance advocacy group Life Happens. Meanwhile, 21% said they'd turn to their employer-sponsored disability insurance.

"We're all trying to get to the finish line and retire at some point," said Justin Gibson, a specialist at insurance marketplace Breeze. "Probably the biggest thing that could throw something like that off is a heart attack or stroke that keeps you from working."

While many people expect Social Security Disability Insurance to help, the average payment is about $1755 a month, per the most recent data from September.

A personal disability insurance policy can replace a large portion of your salary if you're unable to continue your line of work — or work at all.

"It's about making sure that, whether or not your body can keep up, you've got income," Gibson said.

Disability insurance can replace your income, providing cash that you can use to cover anything from living expenses to medical bills.

There are two types of disability insurance, short term and long term.

Short-term disability replaces between 50% and 80% of your income, typically for three months to a year. This type of disability coverage is commonly used during recovery from surgery, an accident or childbirth. The elimination period — which functions like a deductible — is typically 14 days but can range from seven to 30 days.

Long-term disability comes into play if you're facing a disability that will affect you for two years or more. It typically replaces 60% to 80% of your income, but has a longer elimination period of 90 days or more. Benefits are available for as long as you're disabled, or until you reach retirement age. However, various policies have different definitions of who's considered disabled — for some, eligibility hinges on whether you're unable to resume the specific role you had, while others gauge whether you're unable to work at all.

According to the U.S. Department of Education and the National Institute on Disability, Independent Living, and Rehabilitation Research, the most common reasons for filing for long-term disability are heart disease, back injury and cancer, followed by depression and anxiety.

• Read more: What does disability insurance cover?

About 45% of civilian workers have access to short-term disability benefits through their employer, while 38% can enroll in long-term disability plans, according to BenefitsPro, an online news source for employee benefits and HR professionals.

Whether or not you'll pay taxes on the benefits depends on how you've received them: If you paid for your own plan with take-home pay, you won't owe taxes on the benefits. However, if your policy is through your employer, you will owe taxes on the money distributed as a result of your employer's contributions as income.

Anyone relying on employment income is a candidate for disability insurance.

Doctors and lawyers are often encouraged to purchase long-term disability policies because of their high earning potential and possibly significant student loan debt, Gibson said. And some plans offer benefits that cater to those groups: The Standard's Platinum Advantage policy has an optional student loan rider that can reimburse some or all of your student loan payments if you're unable to work.

"You're talking about folks who, in a lot of cases, took on a quarter of a million dollars of debt in order to get those types of credentials," Gibson said. "If a surgeon gets arthritis in their shoulder, they can't really be a surgeon anymore."

If you have a physically demanding career, obtaining disability insurance could be a smart move to protect your income if you're unable to work due to a chronic illness or injury. People in trade work could also be good candidates for disability insurance for a similar reason.

If you have long-term disability through work, it typically covers 60% to 80% of your salary, Gibson said, so you'd still benefit from a supplemental policy.

"When you add an individual policy to what you have through work, you're basically able to replace your entire take-home pay," he added.

A personal policy may also view your medical history more forgivingly. "Usually those group employee plans have some pretty nasty pre-existing condition language," Gibson said.

And even the best employer-backed disability policy won't follow you if you change jobs. A standalone plan can ensure continuous coverage from one workplace to the next and won't be affected by your employer's choices.

If you're employed, the first step is to find out how much coverage you get from your job. Find out what coverage is offered, and whether it's short-term, long-term or both. Then, find out how much of your income it replaces. From there, consider how you could stack individual coverage on top of your employer's and what percentage of your income it would take to meet all of your financial obligations.

Then, get quotes from several companies and compare them. You can work with a financial advisor to determine what kind of coverage you need or see if your existing life insurance provider offers disability policies.

Once you've found a policy you like, you must apply. For this step, you'll need to submit some information about your medical history, personal details, employment situation and provide proof of income. Once you've applied, the company will finalize your price and, in some cases, order a medical exam for you. Getting a policy will take a few weeks from start to finish, Gibson said.

Your age, gender, occupation and the amount of income you want to insure against potential loss all play into the price you'll pay for coverage.

As with life insurance, the best time to get a disability policy is now. "The younger and earlier into your career you are, the better," Gibson said. "You're going to have a lot more favorable premiums and probably fewer health issues."

For many people who need coverage, waiting can be a gamble. "You can't get insurance once you already know you need it for something," Gibson said.

At CNBC Select, we work with experts who have specialized knowledge and authority based on relevant training and/or experience. For this story, we interviewed Justin Gibson, an insurance agent for disability insurance marketplace Breeze. Previously. Justin worked on mutual funds and annuities at Pacific Life. He received a Bachelor's in business administration from the University of Nebraska at Omaha

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed financial decisions. Every insurance story is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of insurance products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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