Disability insurance is a type of coverage that provides income replacement when a policyholder becomes unable to work due to illness, injury, or disability. It pays a percentage of the insured person's regular income (typically 50-70%) after a waiting period. Coverage is available in two main forms: short-term disability (STD), which covers temporary disabilities for weeks to months, and long-term disability (LTD), which provides benefits for extended periods, potentially until retirement age for permanent disabilities.