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.

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.

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.

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.