The Elimination Period
Think of it as a deductible...
by Bill Olmsted
Terminology for individual long-term disability coverage options and contract provisions can seem rather confusing to someone conducting their initial research only from quotes, sample policies. Let’s 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?
Hopefully, this short synopsis below will answer these questions as well as provide a user friendly reference guide for other important policy terms.
What is an Elimination Period?
An elimination period is the number of days that must elapse between the onset of disability and when benefits first become payable under a disability insurance policy. Look at it as a deductible of sorts. 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. This rule generally applies to coverage obtained through an employer group and on individual plans.
What are my choices? What is the most common selection?
When purchasing an individual policy, the most common elimination period (EP) chosen is 90 days. The options that are available from many carriers are 30, 60, 90, 180, 360 and 720 days. The 90 day EP provides good value and can help provide benefits after an employer short term disability plan ends. The second most common selection is usually 180 days if that employer plan pays short term benefits for this first 6 months.
If a group plan exists - ensure to check with the benefits administrator when the long term portion begins if you are looking to add an individual plan for replacement or supplemental coverage.
Can I change my elimination period in the future?
Most personal contracts will allow the policyholder to adjust benefits and the EP but it may require additional underwriting. Always check with your disability insurance specialist about the current rules that apply.
Can the insurance carrier change my elimination period?
If the contract is both Non-Cancelable & Guaranteed Renewable to the age of 65 or 67 - 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. Ensure to review the contract language to determine exactly what its renewability provisions are.
Does the elimination period have to be completed in consecutive days?
In other words, if a person has a 90 day EP and is disabled for 60 days for example - 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.