What is the Elimination Period of an Individual Disability Policy?

Both long-term and short-term disability private insurance can help you replace lost income when dealing with an illness or injury. When you purchase disability insurance, you’ll have an elimination period, determining when your policy will start paying out after you file a claim.

Keep reading to learn how an elimination period works, the factors influencing an elimination period, and other information about disability insurance options.

What does a disability elimination period mean?

Simply put, a disability insurance elimination period is how long you must wait before an insurer pays out your disability insurance.

This is also known as a waiting period or qualifying period, and while this period can vary in terms of the time frame, the most common range is between 30 days to two years. The elimination period begins on your diagnosis or injury date rather than the day you file the claim.

For example, if you were injured on January 10th and filed a claim on January 13th, the elimination period begins on the 10th since that was the day of your injury.

During this waiting period, you will be responsible for the cost of any necessary medical services for your illness or injury. However, the insurance company will pay your benefits if you file a valid claim after the elimination period.

5 Elements of a Disability Policy

To better understand how an elimination period works in the context of a disability policy, it’s helpful to know the different features of a standard disability policy.

A disability insurance policy is a legal contract with an insurance company so that they will pay a specific monthly benefit if you become disabled. Every contract includes these five elements:

Premium: The amount you or your employer will pay for coverage.
Disability insurance benefit: The amount you’ll get each month if you cannot work.
Benefit period: This is the maximum amount of time you can receive benefits.
Waiting period (or elimination period): The amount of time you are disabled before you can start receiving benefits.
Definition of a disability: Every policy will have a specific definition of what it means to be disabled to qualify for benefits.

How does the elimination period work?

Throughout the elimination period, you must demonstrate that you cannot perform your job duties. Many disability policies require claimants to prove their disabling conditions prevent them from being able to work.

This is why extensive documentation is essential – your doctor should thoroughly document your diagnoses, symptoms, and how these specific health conditions would prevent you from performing your job duties from the day you stopped working.

Although your doctor’s opinions will help, you’ll often need more than a doctor’s note to receive disability insurance. Your disability must be supported with clinical evidence, like test results, imaging studies, and examination findings.

You should also know that you must prove your disability for the entire elimination period. For example, if your elimination period were 30 days, you would need to be in a hospital or disabled for 30 consecutive days within the waiting period before your coverage begins. In contrast, if you accumulated 30 days of coverage over three months, you would not qualify for coverage.

You will not receive long term disability insurance benefits during the elimination period. You must first satisfy the elimination period and continue demonstrating that you cannot perform the duties of your occupation.

Why is an elimination period necessary?

While an elimination period might feel inconvenient for policyholders (and in many cases, it is), it was designed to benefit the insurance company in a few different ways. Here are the two main reasons for this waiting period:

Differentiates from short-term coverage: The elimination period helps differentiate short-term from long-term disability conditions. Only policyholders who cannot work for an extended period qualify for long-term disability insurance benefits.
Reduces risk for insurance companies: An elimination period mitigates risk for insurance companies – they won’t pay benefits until absolutely necessary. This is also why the length of the elimination period can impact the cost of premiums.

Knowing the details and stipulations of an elimination period can drastically enhance your short- and long-term disability application process.

Do individual disability policies have elimination periods?

Yes, individual disability policies typically have elimination periods that you must satisfy before receiving benefits. As mentioned before, the length of this waiting period will vary depending on your policy and insurance carrier.

Factors influencing the elimination period

Several elements will influence a disability insurance policy’s elimination period, including:

Desired premium cost: Usually, the longer the waiting period, the less you’ll pay in monthly premiums.
Disability severity: The type of disability you have could influence the elimination period. A severe disability usually has a shorter waiting period, while a less significant disability would have a longer elimination period. Since you would need coverage right away for a severe disability, this stipulation makes sense in most cases.
Insurer’s guidelines: Every insurance provider has different criteria determining the elimination period, which may vary widely.
Policy terms: Your individual disability policy will dictate the length of the waiting period, which is why it’s so important to review your policy details and understand the terms and conditions.

How long should the elimination period be?

As mentioned previously, the elimination period will vary depending on your policy. The amount of time in the elimination period is ultimately up to the drafter of the policy. You’ll find that the most common length of an elimination period ranges from 90 days to 180 days.

A long-term disability elimination period can also coincide with the distribution of short-term benefits. If it’s allowed under the long-term disability policy, you can receive short-term benefits for the maximum period allowed as described in the policy.

You should also consider if you have a recurrent disability. Let’s say you attempt to go back to work after receiving long-term disability insurance benefits, but then you need to stop working again because of the same disabling condition. In this scenario, you probably won’t have to repeat the elimination period.

On the other hand, if you become disabled because of another condition, you must satisfy an additional elimination period to receive benefits.

Types of disability insurance elimination periods

Here are some of the most common elimination periods for long-term disability insurance:

30 days

While this is the shortest option, it also has the highest premiums. However, this is a good option if you want coverage as quickly as possible.

60 days

While a two-month elimination option is more affordable than the 30-day option, it still generally has a high price tag. However, you might consider this option if you want to receive benefits in a shorter time frame.

90 days

A 90-day elimination period is a popular option – it provides a sweet spot between the premium cost and coverage. This may be a good choice if you can wait up to three months before receiving benefits.

180 days

If you have at least six months of living expenses saved, a 180-day elimination period can help you save money on premium costs. This option provides much lower premiums than shorter waiting periods.

365 days

A year-long elimination period has pros and cons – while your premiums will be extremely low, you’ll need to make sure you can afford your living expenses out of your own pocket for up to a year.

720 days

A 720-day elimination period comes with the lowest premiums, but remember that you’ll be paying your expenses out of your own pocket for nearly two years! That being said, this option doesn’t make much sense for most people.

Elimination period vs. Probationary period

Many people think an elimination period is the same as a probationary period, but this is false! While these are both waiting periods, a probationary period refers to the time period between when a policy is issued and when you can claim benefits, most commonly in the case of employer-issued insurance policies.

On the other hand, an elimination period will allow you to file a claim at any time but will not pay out any benefits until it has expired.

What should you do while waiting for the elimination period to pass?

It’s nearly impossible to time your disability to match the elimination period – after all, this is real life! So, what can you do while waiting to receive the benefits you paid for? Here are a few ideas:

Savings: You should always aim to have between 3 and 6 months of expenses saved, and the reason is for times like this! If anything warrants dipping into your savings, it’s a health emergency.
Short-term disability insurance: This policy can help you cover your daily expenses during the elimination period. This can help you bridge the gap between when you are injured and when your benefits kick in.
Other insurance benefits: You may have other insurance benefits to utilize. For example, a critical illness or accident insurance plan can help you financially during the waiting period.
Family and friends: Turn to loved ones to help you through the waiting period. You may also qualify for community resources or social programs providing financial assistance.

How to choose the right elimination period

The best elimination period for you and your family depends on your financial situation and how long you can get by without benefit payments.

For example, if you have a short-term plan through your employer, you should try to pick an elimination plan that aligns with the benefit period of your short-term coverage. The long-term disability benefits should begin before or when the short term insurance plan ends.

You should also carefully review your financial situation before choosing a plan with an elimination period. For example, if you have six months of income in your savings account, then you could consider a disability plan with an elimination period of 180 days, which would be much cheaper than a shorter elimination period.

However, if you don’t have short-term coverage or much of an emergency fund, then you should prioritize choosing a plan with a monthly premium that you can comfortably afford. In the meantime, you should try to save as much as possible to fill in the gaps with an emergency fund.

You can also consider your relationship status – for example, if your spouse or partner is working, you may be able to afford a longer elimination period as your partner can fill in the gaps.

Other types of disability insurance

Other than long-term disability coverage, there are a few different kinds of disability insurance:

Personal and group disability insurance: A policy you buy on your own is called personal or individual disability insurance, while one you get through an employer is called group disability insurance.
Business overhead expense insurance: Designed for small business owners, this policy pays for your business’s overhead expenses while you can’t work, like accounting fees, employee salaries, payroll taxes, business office rent, and utilities.
Mortgage disability insurance: Also referred to as mortgage payment protection insurance, this type of long-term disability insurance covers your mortgage while you can’t work due to injury or illness.
Social Security disability insurance: Provided by the federal government, SSDI has a lengthy screening process – you must have a condition that will keep you out of work for at least a year.
State disability insurance: Also known as temporary disability insurance, some states (but not all) offer policies funded by deductions from your paycheck, offering coverage for up to a year.
Supplemental disability insurance: If you need more coverage, this adds additional coverage to any disability policy you already have.
Workers’ compensation: Your employer is required by law to provide this coverage – it usually has less coverage than disability insurance, and you must be injured at work to qualify for the benefits.

The Bottom Line

When it comes to long-term and short-term disability private insurance, understanding the elimination policy will help you know which coverage option is right for you. Contact us today to learn more about elimination policies and other types of disability insurance options!