What Is a Benefit Period?
A benefit period is the length of time during which an insurance policyholder or their dependents may file and receive payment for a covered event. All insurance plans will include a benefit period, which can vary based on policy type, insurance provider, and policy premium.
Most individuals are familiar with the benefit period for healthcare insurance, but disability, long-term care, homeowners, and auto insurance policies also carry a benefit period.
- A benefit period is the length of time during which an insurance policyholder or their dependents may file and receive payment for a covered event.
- The length of an insurance policy's benefit period will affect the price of the premium because the longer the benefit period, the greater is the insurer's risk.
- The terms of a benefit period can vary, depending on the type of insurance—such as healthcare, disability, long-term care, homeowners, and auto insurance—and whether it's an individual or group plan.
How a Benefit Period Works
The length of an insurance policy's benefit period will affect the price of the premium because the longer the benefit period, the greater the insurer's risk. Toward the end of the benefit period, the insurer will notify the policyholder of the cost to renew the same coverage for the coming term. For benefit periods to continue uninterrupted, the policyholder must submit the premium payment for the next term before the current coverage expires.
In some insurance policies, the benefit period begins when the insurer accepts the first premium payment—either the full amount due or a scheduled installment. However, other types of policies require that the policyholder finish a waiting or elimination period before the benefit period begins. For example, a long-term disability policy may require a wait of one year before honoring claims for payments. No benefits are payable during any probationary period.
Other programs such as Medicare and Social Security benefits may have a benefit period based on age.
Benefit Periods For Common Insurance Types
Disability insurance (DI) policies typically offer a range of benefit periods, from as short as two years to a length that extends until the insured reaches age 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 30 to 90 days for the benefit period to start, 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 regarding the benefit period they offer depending on if it is a stand-alone policy or one offered through a group, such as an employer. The benefit periods and terms for individual plans are valid for one year before requiring a new premium to continue coverage. For group plans, the benefit periods generally continue as long as the employer continues to pay the premiums. New health insurance plans may require an elimination period, a waiting period, and a pre-existing condition exclusion period before the benefit period begins.
Homeowners' insurance will usually have a benefit period of one year from the stated effective date. New policies may have additional wait periods of 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 requiring a new premium to continue coverage. Some states may impose waiting periods for new auto insurance coverage. For example, Texas will place a 60-day wait on new auto insurance policies. This period gives the insurance provider time to decide if the driver fits within their risk profiles. The benefit period will begin at the end of any waiting period.