Understanding the Elimination Period in Insurance

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

What Is an Elimination Period?

The elimination period is when you must wait before your insurance benefits kick in. It’s essentially a waiting period that begins when you become eligible for benefits.

Example: Imagine you have a disability insurance policy with a 90-day elimination period. If you become disabled, you’ll have to wait 90 days before you can start receiving your disability benefits.

Elimination Period Insurance

How Does an Elimination Period Work?

An elimination period serves as a buffer, letting insurance providers assess the severity of your situation before they begin dispensing benefits. In short, you’ll have to wait through this period without receiving any benefits from your policy.

Types of Policies With Elimination Periods

Elimination Periods in Disability Insurance

Disability insurance is designed to provide financial assistance if you cannot work due to an illness or injury. Here, the elimination period can significantly impact your financial planning.

Choosing the Right Elimination Period

Example: Let’s say you’ve picked a long-term disability policy with a 180-day elimination period. You’ll need sufficient savings to cover your six-month expenses before your benefits kick in.

Elimination Period In Insurance

Elimination Periods in Health Insurance

In health insurance, elimination periods are less common but can apply to specific conditions or treatments. This period may also coincide with a waiting period for certain benefits.

How It Affects Your Coverage

  • Some policies may have an elimination period for surgeries or specific treatments.
  • Maternity benefits often have both waiting and elimination periods.

Example: You’ve chosen a health insurance policy with a 30-day elimination period for surgical procedures. If you need surgery, you’d have to wait 30 days post-approval before the insurance coverage would help with the costs.

Elimination Periods in Long-Term Care Insurance

Long-term care insurance covers the costs of services like in-home care or nursing home stays. The elimination period here dictates how long you’ll need to pay out-of-pocket before the policy starts covering expenses. Sometimes also called a waiting period, it can range anywhere from 30 to 90 days, or even longer in some cases, depending on your specific policy.

Importance of Planning Ahead

  • Consider your savings and income when selecting an elimination period.
  • Shorter elimination periods mean higher premiums but quicker access to benefits.

Why Do Insurance Policies Have an Elimination Period?

Insurance companies include elimination periods to manage risks and keep premium costs lower. An elimination period can serve as a deterrent for false or frivolous claims, thus keeping the system more effective for those who genuinely need it.

Benefits for the Policyholder

  • Lower Premiums: Elimination periods can translate to reduced premium costs.
  • Deterrence for Misuse: They deter unnecessary usage, keeping resources available for legitimate needs.

Example: You opted for a short-term disability insurance policy with a 7-day elimination period. Your premiums might be higher than a similar policy with a 30-day elimination period.

Elimination Period Insurance: What to Consider

When deciding on an elimination period, carefully weigh your financial situation and needs. A shorter elimination period might give you quicker access to benefits, but your premiums will be higher.

Factors to Consider

  • Financial Cushion: Do you have enough savings for a longer elimination period?
  • Nature of Risk: What are the chances you’ll need to use the insurance benefits soon?

Example: If you have a solid emergency fund, you might opt for a longer elimination period in your disability insurance, which can significantly reduce your premiums.

Waiting Period for Insurance vs. Elimination Period

While both terms may sound similar, they serve different functions. A waiting period is the time before your insurance coverage starts. On the other hand, an elimination period is when you wait before benefits kick in after an incident occurs.

Example: In a health insurance policy, you might have a waiting period of six months for certain treatments. After that, if you require surgery, an elimination period of 10 days could be applied before the insurance benefits cover the surgical costs.

Elimination Period

Next Steps

Understanding the elimination period can significantly impact how well your insurance policy serves you. This waiting period influences when you’ll receive benefits and how much you’ll pay in premiums. Understanding the concept and how it applies to different types of insurance helps you make a more intelligent decision for your financial well-being. Armed with this knowledge, you’ll be better equipped to choose a genuinely beneficial policy.

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Frequently Asked Questions

What is the shortest possible elimination period?

The shortest possible elimination period varies by the type of insurance policy. For short-term disability insurance it can be as short as zero days, meaning benefits start immediately after a qualifying event. In health and long-term care insurance, elimination periods are generally longer, often starting at 30 days.

What does the benefit period mean in insurance?

The benefit period in insurance refers to when an insurance policy will pay out benefits for a covered event. Depending on the policy, it starts after the elimination period ends and can range from weeks to years.

Are benefits paid during an elimination period?

No, benefits are generally not paid during the elimination period.

Do pre-existing conditions affect the elimination period?

Pre-existing conditions can affect the elimination period, depending on the insurance policy. Some policies may have longer elimination periods for conditions present before the policy began, while others might exclude such conditions from coverage altogether. Always check policy terms carefully.

How long is the waiting period for long-term care insurance?

The waiting period for long-term care insurance, often called the elimination period, typically ranges from 30 to 90 days but can be as long as 180 days or more. This is when a qualifying event occurs and when benefits start. The length of the waiting period can affect the premium cost and should be chosen based on individual financial and care needs.

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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