Final answer:
Insurance companies primarily use the insured's income to determine the extent of disability benefits in a contract. While occupation and age are influential, income dictates the benefit amount, aligning with the principle of compensating for lost wages due to disability.
Step-by-step explanation:
To determine the extent of disability benefits promised in a contract, an insurer primarily uses D) Income of the insured. This is because the disability benefits are often designed to replace a portion of the insured's earnings. Factors such as occupation and age may influence the cost or availability of disability insurance, as certain professions carry higher risk and older individuals are more likely to become disabled. However, it's the insured's income that typically dictates the amount of benefit. For example, an individual with a high earning job would receive greater benefits, as the insurance is supposed to compensate for lost wages due to disability.
It's also important to understand the role that occupation and other factors can play. High-risk occupations, such as mining or factory work, are associated with a higher likelihood of disability. Adverse selection is a notable issue in insurance markets, where riskier individuals are more likely to seek insurance, potentially increasing costs for insurers. Insight into this matter also emphasizes the significance of unhealthy lifestyles and risky cultural behaviors, which can create uneven patterns of disability across regions and contribute to economic strains on both individuals and governments.