What is the Elimination Period of an Individual Disability Policy
The elimination period or waiting period of an individual policy is the duration of time you are continuously disabled before the policy kicks in. Typically, it’s somewhere between 30 days and 90 days for a short-term policy. And for long-term policies, it is 180 days on average.
Good thing it starts on the day your disability begins, not when the claim is submitted. Simply put, it’s the time for which you receive no benefits. Still confused? This blog will explain everything you need to know about the waiting period and what can cause a delay.
Understanding the Elimination Period
For individual disability policies, the elimination period is dependent on the type of policy you buy. You can always negotiate on the elimination policy. The shortest period before disability insurance kicks in is 30 days. Shorter periods come with higher premiums, though.
90-Day Elimination Period:
The most popular choice for the elimination period is 90 days. It’s because it offers a lower premium rate. You can nicely manage the policy with even a minimum wage. Plus, you can use your savings and emergency funds in those three months.
Typical Elimination for NY SDI Policies (State Disability Insurance):
You can also explore State Disability Insurance for even shorter waiting periods. Typically, 7 days or a period specified by the state government. For instance, NY SDI benefits start after eight consecutive days of injury.
Customization and Cost: Making the Right Choice
When it comes to selecting a waiting period you can customize it to any extent. However, choosing the best fit for your financial buffer is a sweet spot. Over-customization means a premium burden. Consult an insurance broker to explore multiple options.
How Does the Elimination Period Affect Premium Cost in Accidental Insurance?
The rule is simple: a longer elimination period means a lower premium and vice versa. The reason is that insurance companies will be less likely to have to pay a claim if it heals before elimination. Especially for short-term policies.
- Pros: Benefits kick in quickly, offering maximum income stability.
- Cons: Significantly higher monthly premium. Best for individuals with minimal emergency savings.
Related Policy Concepts and Comparison
Elimination periods of individual disability insurance are always mixed with other similar terms. Here are the details:
Elimination Period vs Probationary Period:
- Elimination Period: The time after a disability begins during which benefits are withheld.
- Probationary Period: A specified time at the very start of the policy during which no benefits will be paid for illness-related disabilities. Usually, accidental injury is covered immediately. It’s a one-time wait to prevent people from buying a policy after they know they are ill.
Standard Elimination Period for a Critical Illness Insurance Policy:
Critical Illness (CI) policies often use a short elimination period, typically 0 days (upon diagnosis) or 30 days. This is because CI policies pay a lump sum upon diagnosis of a covered illness. It’s not a monthly income, making the concept slightly different.
Supplemental Health Insurance
Specialized Supplemental Short-Term Disability plans or riders might offer elimination periods as short as 7 days (under two weeks), designed to bridge the gap before a 90-day long-term policy or employer STD kicks in.
Compare Elimination Period:
Here is a comparison between elimination periods and when it is best to choose that policy
| Elimination Period | Premium Impact | Best For… |
|---|---|---|
| 30 Days | Highest | Minimal savings, maximum risk transfer |
| 90 Days | Moderate | Most common, standard financial buffer |
| 180/365 Days | Lowest | Large emergency fund, higher net worth |
Final Thought:
The optimal elimination period is a balancing act between your monthly premium cost and your personal emergency savings. If you have savings for 3 to 6 months, go for a longer elimination period. Otherwise, 30-day elimination is a bottleneck! You must have it to fight any disability in the near future. Remember, statistics show almost one out of four individuals can face disability before retirement. So, individual disability insurance is a must-have.
If you are struggling to find a suitable insurance provider, Smart Apple can help you get the best deal. We specialize in helping individuals review their financial readiness and customize the policy with the ideal elimination period to fit their budget and needs.