Think of it as a Deductible...

Terminology for individual disability insurance can seem rather confusing to someone conducting their initial research only from quotes. Let us analyze a very important component of any policy - the elimination period.

• What is it and why is it important?
   
• Are there different elimination period options and if so, which one is the most popular choice?

What is the Elimination Period? 

It is the number of days between the onset of the disability and when you become eligible to receive benefits. Think of it as a deductible. If a policy includes a 90-day elimination period, that indicates you must be disabled for 91 days or longer to qualify for benefits from the insurance carrier.

The reality is that benefits are usually paid at the end of the month, so a 90-Day wait is actually 120 days before you collect a check. A 180-Day elimination period would be 210 days until you collect any money.

What is the Most Common Choice?

When purchasing an individual policy, the most common elimination period (EP) chosen is 90 days by far. You will find every major company provides the best value when you choose the 90-day option. The savings are minimal when you extend it to 180 days, and the cost skyrockets when you choose a shorter option because so many more illnesses and accidents would qualify for benefits. The options that are available from many carriers are;

• 30 Days
• 60 Days
• 90 Days
• 180 Days
• 360 Days
• 720 Days

Can I Change my Elimination Period in the Future?

A company will always be willing to extend the elimination period in the future because they would have less liability, but if you want to shorten it you are going to have to be underwritten all over again. A company would be very concerned about why you would want to change to a shorter elimination period all of a sudden, so I would expect strict underwriting if this were to happen.

Can the Insurance Carrier Change my Elimination Period? 

If the contract is both Non-Cancellable & Guaranteed Renewable, only the policyholder has the right to alter the contract provisions. The contract cannot be changed by the provider. However, if the contract does not include those renewability provisions, in some cases the insurance company can change the elimination period options.

Does it Have to be Completed on Consecutive Days? 

In other words, if a person has a 90-day EP and is disabled for 60 days, returns to work for 2 weeks, and is then disabled again, will the EP restart? Again, it is based on each contract’s provisions. Some provide what is called an Accumulation period that provides the policyholder a longer period of time to accumulate days to satisfy the EP. There are policies that will actually give you over 200 days to accumulate your 90 days elimination period. 

Some contracts have an elimination period that may actually require the days of disability to be consecutive to trigger a benefit. This means if the contract has a 90-day EP, you need to be disabled for 90 straight days with no interruptions. 

Take the time to speak with your financial representative or a specialist who understands the current disability insurance marketplace when selecting your income protection coverage. This market changes frequently with a variety of options that negate a simple comparison based strictly on price. Ensure you always read a company’s specimen policy to understand all terms and conditions and whether it suits your own personal situation.

This material contains the current opinions of the author but not necessarily those of Guardian or its subsidiaries and such opinions are subject to change without notice.