What is 'Elimination Period'

An elimination period is the length of time between when an injury or illness begins and receiving benefit payments from an insurer. Also known as the "waiting" or "qualifying" period, policyholders must, in the interim, pay for these services. The resulting effect can be thought of as a deductible.

BREAKING DOWN 'Elimination Period'

In general, the shorter the elimination period, the more expensive the policy and vice versa. Typically, most insurance policies have the best premium rates for 90-day elimination periods. A policy with anything longer than 90 days, while less expensive, may not save you much compared to the extra risk you take on.

The elimination period starts on the date that your injury or diagnosis renders you unable to work. For instance, if you were in a car accident that left you unable to work, and you filed a claim 30 days after the accident, the elimination period would begin the day of the accident. It's also possible that your first disability check won’t arrive until 30 days after the elimination period ends, meaning if you choose a 90-day elimination period, it might be four months before you receive your first benefit.

Elimination Periods and Long-Term Care Insurance

When choosing a long-term care (LTC) insurance policy, some policies require the elimination period to consist of consecutive days of disability. For example, if your elimination period was 90 days, you would need to be in a hospital or disabled for 90 consecutive days before any coverage begins. Accumulating 90 days in total over a specified period of time (such as six months) would not qualify you for coverage. Before buying LTC insurance, make sure you know the terms of the elimination period.

What Elimination Period is Right for You?

The right elimination period for you depends on your financial situation and how long you can afford to make it without benefit payments.

With a short-term disability plan through your employer, for instance, the priority should be to pick a plan that aligns with the benefit period of that short-term disability plan. Long-term disability insurance should pick up where the short-term insurance leaves off.

If you have enough savings to cover six months or longer of no income, you might consider 180-day elimination period. It can be significantly cheaper than a shorter elimination period. If you don’t have a short-term plan or an emergency fund, you should choose an elimination period with a monthly premium you can afford. Then, start saving as much as you can, so you can have that emergency fund to cover the gap. If your spouse is working and could support you both if you're not working, a longer elimination period might work for you. 

RELATED TERMS
  1. Disability-Income (DI) Insurance

    Disability income (DI) insurance provides supplementary income ...
  2. Concurrent Periods

    Concurrent periods refers to specific points in time in which ...
  3. Successive Periods

    Successive periods are periods of time that follow one another ...
  4. Credit Insurance

    Credit insurance is a type of insurance that pays off one or ...
  5. Payment Protection Plan

    A payment protection plan allows customers to stop making credit ...
  6. Total Permanent Disability (TPD)

    Total permanent disability (TPD) is a condition in which an individual ...
Related Articles
  1. Insurance

    Understanding Disability Insurance Policies

    Disability insurance is often overlooked because it is confusing. Here is some information to make it easier to understand.
  2. Financial Advisor

    Disability and Business Overhead Coverage for the Self-Employed

    What every small business owner or professional needs to know about individual and business overhead disability income insurance plans.
  3. Personal Finance

    Protecting Against Income Loss With Insurance

    Having an emergency fund and the appropriate insurance for your stage of life helps protect against unexpected loss of income.
  4. Personal Finance

    Why Having an Emergency Fund Is Essential

    Do you know how you’d pay the bills if you lost your job, had a health crisis or needed a major car repair? That's why an emergency fund is essential.
  5. Insurance

    Protecting Your Income With Disability Insurance

    For a high-earning professional, income protection is essential. Here's what to look for in a disability insurance policy.
  6. Insurance

    How to Protect Your Income No Matter What

    What does it mean to insure your income? Here are a variety of ways to do it and some insights into when it might make sense to invest in income insurance.
  7. Insurance

    Why Your Company Insurance Coverage Isn’t Enough

    Even if you have group life or disability insurance, it pays to have individual coverage too.
  8. Financial Advisor

    Should You Buy A Life Insurance Disability Rider?

    Does it make sense to pay an additional cost for a waiver of premium rider on a life insurance policy?
  9. Personal Finance

    CFPs: The Quarterback of a Financial Team Part 1

    In the event of an illness or injury, a CFP can play quarterback in helping you get benefits owed.
  10. Retirement

    Strategies to use life insurance for retirement

    Here's how to incorporate life insurance into a plan to ensure that you and your family have the smoothest possible transition into retirement.
RELATED FAQS
  1. What is an elimination period?

    Elimination period is a term used in insurance to refer to the time period between an injury and the receipt of benefit payments. Read Answer >>
  2. What are the maximum Social Security disability benefits?

    The average Social Security disability benefit amount for a recipient of SSDI in 2018 is $1,197 per month, but a beneficiary ... Read Answer >>
Hot Definitions
  1. Gross Profit

    Gross profit is the profit a company makes after deducting the costs of making and selling its products, or the costs of ...
  2. Diversification

    Diversification is the strategy of investing in a variety of securities in order to lower the risk involved with putting ...
  3. Intrinsic Value

    Intrinsic value is the perceived or calculated value of a company, including tangible and intangible factors, and may differ ...
  4. Current Assets

    Current assets is a balance sheet item that represents the value of all assets that can reasonably expected to be converted ...
  5. Volatility

    Volatility measures how much the price of a security, derivative, or index fluctuates.
  6. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
Trading Center