In the past 25 years, the number of severely disabled people ages 17 to 44 has increased 400 percent. While the number of people with protection has also increased, most Americans still have a disability income protection gap.

This is alarming when you consider in a year's time, chances are only one in 1,200 you will need your fire insurance—generally considered a necessity for homeowners—but one in eight you will be sick, injured or killed.

The risk of becoming disabled will continue to increase.

Aging a main factor

Because of advanced trauma and cancer care, more people today survive illnesses and injuries that were deadly 20 years ago. In 1930, the average U.S. life expectancy was 61; today, it is 76; and by the year 2050, it will be 82. Today, there are 3.6 million Americans over age 65; by 2040, there will be 13.8 million.

With Americans now living longer, age has and will continue to have a profound impact on disabilities. According to the National Association of Health Underwriters, there are 3.74 disabilities per 1,000 people ages 45 to 49. This increases nearly five times more with age, to 15.18 disabilities per 1,000 people ages 60 to 64.

In addition, the traditional retirement age is moving up, and more people are likely to work part-time after retirement, thus increasing the risk of a disability later in their life.

Changing workforce

More than 10.5 million people are starting their own businesses, consulting or working at home, according to the Bureau of Labor Statistics. And more women than ever are now working; many families today rely on two incomes. In the early 1900s, there were only 500,000 married women in the labor force. They represented just 4.5 percent of all married women. Today, there are about 39 million married women working outside the home (representing 60 percent of all married women), and 17 million of them have children under age six. With more women working and families relying on two incomes, the need for disability protection has become greater, especially since women are twice as likely to suffer a disabling illness than men. And with more people working out of their homes and earning substantial incomes, the need for more flexible, individualized protection is on the rise.

Increase in workplace disabilities

Over the years, the causes of disabilities have changed in the workplace. Today, disabilities due to psychiatric conditions, severe back pains, Carpal Tunnel Syndrome, muscle/tissue disorders and Chronic Fatigue Syndrome are increasing dramatically. Among the most common long-term disabilities (those lasting longer than three years) are circulatory and heart conditions, back disorders, psychiatric conditions, general sickness and subjective pain. Common short-term disabilities (those lasting less than three years) include normal pregnancies as well as pregnancies with complications, injuries, muscular or skeletal problems, and psychiatric or substance abuse problems.

Adding up disability benefits

Generally, disability programs coordinate paying benefits: Workers' Compensation pays first, offset by Social Security, and then an employer or other disability plan kicks in. Here's what each may pay:

Workers' Compensation: If you become disabled from a work-related accident, workers' comp pays cash for disability and medical benefits, usually for a short time. What you are paid depends on the state you live in. States usually limit the benefit to two thirds of the state's average wage. (According to the Bureau of Labor Statistics, the average weekly benefit paid by workers' comp is $89.)

Social Security: To qualify for Social Security benefits, you must have worked long enough under the system and be unable to do substantial work for at least 12 months. Only about 30 percent of claims are approved the first time around; 62 percent of denials are overturned in appeal.

For a single person, the average Social Security–paid monthly benefit is only $704 ($176 a week). If you're married and have children, the average monthly benefit is just $1,169 ($293 a week).

Employer Coverage: You probably have some sick leave or short-term disability coverage at work. If you work for a larger company, you may also have long-term disability protection, which usually replaces up to 60 percent of your income (up to $5,000 a month) for as long as you're disabled. (In California, New Jersey, Hawaii, New York and Rhode Island, benefits are provided through temporary disability programs.)

However, under most employer-paid disability plans, taxes are deducted from your benefit. And government benefits are subtracted from that, so you'll never receive more than your salary. In fact, it ends up being much less than your salary.

The latest in disability coverage

"Own occupation" vs. "any occupation": Traditional disability policies protect your ability to do your job—that is, protect you for your "own occupation." For example, assume you must travel for your job in public administration. If your disability prevents you from traveling, you may collect a full benefit even if you are capable of research work.

Today, many policies limit your "own occupation" coverage to two years and then switch to "any occupation." This means you'll get paid if you can't do any job your experience and skills qualify you for. (Some insurance carriers define a qualifying job as one that pays at least 60 percent of former earnings.)

Inflation protection: Most insurance carriers now offer a "guaranteed increase" rider to make sure the monthly benefit amount keeps pace with inflation. This increase is usually automatic without a medical exam and increases at certain times—either once a year or every couple of years.

Mental and nervous disabilities: Determining what you can and can't do becomes difficult when diagnosing ailments such as Chronic Fatigue Syndrome, depression and stress. These conditions are usually considered "mental and nervous disabilities," and most insurers limit coverage to 24 months.

Rehabilitation: Employers and insurance carriers are now introducing rehabilitation programs at the onset of a disability—the idea is to get people back on the job sooner. Rehabilitation programs may include occupational therapy, career counseling, retraining and high-tech equipment, and vocational-rehab programs.

Residual benefits: To help employees ease back into work, some insurance companies offer "residual" benefits, which help fill the gaps between previous and current earnings, and pay out until age 65 if the disability becomes permanent. (Residual benefits pay if you're making 80 percent or less of your previous earnings.)

Catastrophic coverage: Some insurers have also designed "catastrophic" disability coverage to protect against a severe disability: a disability that not only prevents you from working but also requires assistance with activities of daily living, such as dressing and eating.

Long term care protection: In recognizing the aging workforce, some insurers are adding long term care riders to policies. These riders automatically convert the disability product to long term care at retirement age to provide lifelong coverage.

Supplemental protection a must

In recent years, employers have cut back on their contributions for disability coverage and left the difference up to employees. Regardless of employers' contributions, most people should consider supplementing their coverage with individual protection.

Unlike employer coverage, individual coverage you purchase is portable. That is, you can take it with you if you change jobs or move. In addition, individual coverage is tax-free, while an employer-paid plan is taxed.

The American Society for Public Administration endorses a disability income plan that offers many of these premier coverage options. In addition, the plan is flexible and adaptable to your needs.