What primary purpose does a disability insurance policy serve?

A disability insurance policy is specifically designed to replace lost income when an individual is unable to work due to a disabling condition. This form of insurance provides financial support that helps cover daily living expenses, medical bills, and other financial obligations that may arise during the period of disability. The core function of disability insurance is to offer a safety net, ensuring that individuals can maintain their standard of living despite the inability to earn an income from their regular employment.

Other options outline different forms of insurance purposes. For example, providing retirement income aligns more closely with life insurance or retirement annuity products, which are aimed at securing funds for when an individual retires. Covering business expenses solely refers to business overhead insurance, which specifically addresses the operational costs of a business rather than personal income needs. Offering a lump sum payment can be characteristic of certain life insurance policies or specific types of accident insurance but does not reflect the ongoing income replacement that is the primary focus of disability insurance.

Thus, the main function of a disability insurance policy is clearly to replace lost income during a period when an individual cannot work due to a disability, fulfilling an essential role in personal financial planning.