An income replacement policy is a disability insurance contract which guarantees a certain level of income.

For instance, consider a surgeon who suffers a hand injury and is unable to perform surgery. While that surgeon cannot earn money from surgery, they may be able to teach at a medical school. The income from the medical school will almost certainly be less than their previous income and that is where an income replacement policy can provide assistance. The difference between these two incomes is made up by the policy. This type of policy is less expensive then a policy which would pay full benefits even if the surgeon made money from another occupation. This information is general in nature and should not substitute for the advice of an expert in the field.