What is a Benefit Period

A benefit period is the length of time during which a policyholder or their dependents may file and receive payment for a covered hazard. All insurance plans will include a benefit period, which can vary by policy type, insurance provider, and policy premium. Most individuals are familiar with the benefit period for health care insurance, but disability, long-term care, homeowner's and auto insurance policies will also carry a benefit period. 

BREAKING DOWN Benefit Period

The benefit period of an insurance policy will impact the price of the premium since an insurer faces a more significant risk when the period is longer. Towards the end of the benefit period, the insurer will notify the policyholder of the cost to renew the same coverage for the following term. The policyholder must submit the premium payment for the next term before the expiration date of the current coverage for benefit periods to continue, uninterrupted.

In some insurance, the benefit period starts with the acceptance of the first premium payment which can be the full amount due or a scheduled installment amount. However, other types of insurance will require that the policyholder finish a waiting or elimination period before the benefit period will begin. For example, long-term disability policy may require a wait of one year before honoring claims for payments. During any probationary periods, no benefits are payable.

Other programs such as Medicare and Social Security benefits may have a benefit period with a basis on age.

Benefit Periods of Common Insurance Types

Disability insurance (DI) policies typically offer a range of benefit periods, from as short as two years to those with a length which extends until the insured reaches the age of 67. By contrast, a policy with a two-year benefit period will only cover lost income for two years. Most short-term disability policies require a wait of between 30 to 90 days for the start of the benefit period while long-term plans may require a one-year delay.

Long-term care insurance (LTC) and disability policies usually have an elimination period before the benefit period kicks in. These plans come with two-year, three-year, five-year, and unlimited benefit periods. However, long-term care plans may carry additional limitations on daily and lifetime benefits.

Health insurance policies can vary on the benefit period they offer depending on if it is a stand-alone policy or one through a group, such as that offered by an employer. Individual plans will have benefit periods and terms which are valid for one year before it requires the payment of a new premium to continue coverage. Group plans will have benefit periods which continue as long as the employer continues to submit group premium payments. New health insurance plans may require an elimination period, a waiting period, and a pre-existing condition exclusion period before the benefit period begins.

Homeowner insurance will usually have a benefit period of one year from the stated effective date. New policies may have additional wait periods of between 30 to 90 days before coverage goes into effect. During a valid benefit period, a homeowner may file a claim for any covered hazard they may experience. 

Automobile insurance will also usually have a benefit period and term of one year before it is necessary to renew coverage. Some states may impose waiting periods for new auto insurance coverage. As an example, Texas will place a 60-day wait on new auto insurance policies. This period gives the provider a chance to decide if the driver fits within their risk profiles. The benefit period will begin at the end of any waiting period.