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Elimination (Waiting) Periods

When you become disabled, you have to wait a certain number of days before you are entitled to collect disability benefits. This waiting period is called the elimination period. You choose the length of your elimination period when you purchase your individual disability insurance policy.

You'll be offered a choice of elimination periods, ranging from 30 to 720 days, although some companies are doing away with short elimination periods, offering 30- or 60-day periods only to low-risk individuals. Even so, many experts recommend that individuals buying disability insurance choose an elimination period of no more than 90 days.

You should base your decision on two factors: 1) how the elimination period affects the premium you pay and 2) how long you could live off your savings without receiving disability benefits.

How does the elimination period you choose affect the premium you pay?
Like auto and health insurance deductibles, the longer the elimination period, the lower the premium. For example, a policy with an elimination period of 60 days costs more than one with an elimination period of 180 days--often substantially more. Why? Because statistically it's more likely you'll recover and go back to work within six months than within two months. Thus the insurance company is more likely to have to pay a claim if your elimination period is shorter.

How long could you live off your savings without receiving disability benefits?
Before choosing an elimination period, you should think about how long you could live off your savings if you became disabled and were unable to work and earn a living. If you have a lot of money saved up or have other sources of income, you might want to choose a longer elimination period. On the other hand, if you have little or no money saved up, and have no other income, you'd be wiser to choose a shorter elimination period.

After weighing the premium cost against the coverage you need, you should choose the shortest elimination period you can afford. When you're considering your options, keep in mind that in most cases you won't receive an insurance payment until you are owed a month's benefit. For example, a 90-day elimination period means that you will probably be out of work for 120 days before you receive any money, so if you choose a 90-day elimination period, you should have enough money saved up to support yourself for four months, not three.