Disability income policies are designed to replace the insured's lost wages when a disability occurs.

• A. They are designed to replace lost wages when an accident or illness occurs
• B. They pay medical bills only
• C. They cap benefits at $1,000 per month regardless of income
• D. They cover only short-term disabilities

Answer: (A)

Disability income policies are designed to replace earned income when a disability prevents the insured from working. They provide ongoing payments that help cover living expenses during the period of incapacity, reflecting the wages that are lost due to the disability. This concept applies whether the disability arises from an accident or an illness, which is why the statement about replacing lost wages is the best description. Health insurance, on the other hand, covers medical bills, not earnings. The benefit is not typically a fixed $1,000 per month regardless of income, but rather a portion of pre-disability earnings based on the policy terms. And while some policies are short-term, many disability policies can provide benefits for longer periods, depending on the plan.