Looking through the forum, I believe this used to be the case, but can't find a discussion outlining why it changed to 'Install from Disk...'
On iOS, it is still 'Install from File'
Safari has 'Import Browsing Data from File or Folder...'
So I think to be consistent across macOS and iOS, whilst following Apple's choice of language, 'Install from File or Folder...' would be more appropriate.
To be pedantic, could an extension be installed from a mount, spinning disc, cloud, or other source? If so, the broader file/folder is more accurate whilst being more general user friendly - more people know what those are vs a 'disk'.
Apologies if this was already hashed out. Also, I think I installed something by pointing at a folder, which is why I've included that. If that's possible on iOS too, then that should also be consistently worded. If I'm misremembering, then just 'File' on both makes sense.