What is the primary purpose of a disability insurance policy?

The primary purpose of a disability insurance policy is to replace a portion of the insured's income if they become unable to work due to a disability. This type of insurance is designed to provide financial protection for individuals who experience a loss of income as a result of illness or injury that prevents them from performing their job. It typically pays out a percentage of the policyholder's regular earnings, which helps them maintain their standard of living and cover essential expenses, such as rent or mortgage payments, bills, and daily living costs.

Disability insurance is crucial for safeguarding one's financial stability during challenging periods where alternative income sources may be limited or non-existent due to the inability to work. This feature differentiates disability insurance from other types of coverage that focus on medical expenses, family security, or long-term care services, which do not address the replacement of income directly during an individual's incapacity to earn. Thus, the intent of disability coverage is centered on income replacement rather than solely addressing medical or caregiving needs.