If you’re looking into long-term disability or individual disability insurance, you may have come across the term “elimination period.” This is an important concept to understand as it can affect when you will receive benefits if you become disabled. In this article, we will explain what the elimination period in a long term disability claim is and how it works.
What is an Elimination Period?
An elimination period is the amount of time you must wait after becoming disabled before you receive long-term disability benefits. This period is also sometimes called the waiting period or the qualifying period. It’s like a deductible in that it’s a period of time you must satisfy or “pay” before your benefits kick in.
How Does It Work?
The length of time varies depending on your insurance policy. It’s typically measured in days or weeks and can range from 30 days to a year or more. Most of the policies we see have a 180-day elimination period.
During this period, you’ll need to rely on other sources of income, such as sick leave or short-term disability benefits. Once the wait is over, if you are still unable to work due to your disability, you will receive benefit payments. The amount of benefits you receive will depend on your policy’s terms and conditions.
Why Do Insurance Companies Have Elimination Periods?
Insurance companies have waiting periods for a few reasons. First, it helps the insurance carrier manage their risk. They do not want to start paying out benefits as soon as someone becomes disabled. This would make it more difficult for them to predict their costs and set premiums.
Second, longer elimination periods can help keep insurance premiums more affordable. By choosing a longer period, policyholders can reduce their premiums because they’re taking on more risk themselves. A shorter elimination period comes with higher premiums.
What Should You Consider When Choosing an Elimination Period?
When choosing a disability insurance elimination period, there are a few factors to consider:
- Your current financial situation: How long can you afford to wait before receiving benefits? Do you have other sources of income to rely on during the wait period?
- Your savings: Do you have savings set aside as an emergency fund that can cover your expenses while you wait?
- Your employer’s benefits: Does your employer offer short-term disability benefits that can cover you during the wait period?
- Your premium: A longer period can reduce your premium, but it also means you’ll need to wait longer to get paid.
Conclusion
The elimination period is an important concept to understand when it comes to long-term disability insurance. It’s the period of time you must wait after becoming disabled before you can start receiving benefits. Choosing the right period for your needs requires careful consideration of your financial situation, savings, and other sources of income. By understanding how the elimination period works, you can make an informed decision about your long-term disability coverage.
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