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. Benefit Period

    The benefit period is the length of time during which a benefit ...
  2. Disability-Income (DI) Insurance

    Disability income (DI) insurance provides supplementary income ...
  3. Credit Insurance

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

    A payment protection plan allows customers to stop making credit ...
  5. Insurance

    Insurance is a contract (policy) in which an insurer indemnifies ...
  6. Weekly Premium Insurance

    Weekly Premium Insurance is a type of financial protection where ...
Related Articles
  1. Insurance

    Choosing The Best Disability Insurance

    Social Security benefits can be hard to collect. Find out why you need disability insurance to protect your income, and learn how to choose the right policy for you.
  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. Insurance

    5 Things You Need to Know About Disability Insurance

    It's important to understand the true value of your ability to earn income, and to make sure it's protected.
  5. Insurance

    Group and Individual Disability Insurance

    Disability coverage is important to have in case you become physically unable to work. You can purchase group or individual coverage.
  6. Financial Advisor

    Taking The Surprise Out Of Long-Term Care

    Don't be caught unprepared - find out what to look for in LTC insurance policies.
  7. Insurance

    Disability Insurance For Business Owners

    If you become injured and no longer able to work, would your business survive?
  8. Insurance

    How To Buy Long-Term Care Insurance Cheaply

    Consumers looking for long-term care insurance shouldn't have to pay full price. Despite the sometimes-hefty costs, there are ways to save on premiums.
  9. Financial Advisor

    7 Issues to Consider When Determining Life Insurance Coverage

    Seven issues to consider when buying life insurance to ensure the coverage is tailored to meet your personal financial situation.
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. Is there a limit on the amount of disability insurance that I can buy?

    Disability insurance policies are designed to partially replace your income in the event that you become disabled and cannot ... Read Answer >>
  3. 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 >>
Trading Center