Elimination Periods: Overview and Special Considerations

What Is an Elimination Period?

An elimination period is a term used in the insurance industry to refer to the length of time between when an injury or illness begins and receiving benefit payments from an insurer. Elimination periods are usually associated with long-term care (LTC) insurance and disability insurance.

Also known as the waiting or qualifying period, policyholders must, in the interim, pay for these services. The resulting effect can be thought of as a deductible.

Understanding Elimination Periods

The most common elimination period is 90-days, but they may be anywhere from 30 to 365 days. In general, the shorter the elimination period, the more expensive the policy (and vice versa). Typically, most insurance policies have the best premium rates for 90-day elimination periods.

A policy with anything longer than 90 days, while less expensive, may not save you much when compared to the extra risk you'll take on. While you may be saving money by paying a lower premium, you could find yourself in a tricky financial situation if you need coverage.

The elimination period starts on the date that your injury or diagnosis renders you unable to work. For instance, if you were in a car accident that left you unable to work, and you filed a claim 30 days after the accident, the elimination period would begin the day of the accident. It's also possible that your first disability check won’t arrive until 30 days after the elimination period ends, meaning if you choose a 90-day elimination period, it might be four months before you receive your first benefit.

Special Considerations

Elimination Periods and Long-Term Care Insurance

Before buying LTC insurance, make sure you know the terms of the elimination period. Most policies require policyholders to need consecutive days of services or disability. 

For example, if your elimination period was 90 days, you would need to be in a hospital or disabled for 90 consecutive days before any coverage begins. Accumulating 90 days in total over a specified period of time (such as six months) would not qualify you for coverage.

Choosing an Elimination Period

The right elimination period for you depends on your financial situation and how long you can afford to live without benefit payments.

With a short-term disability plan through your employer, for instance, the priority should be to pick a plan that aligns with the benefit period of that short-term disability plan. Long-term disability insurance should pick up where the short-term insurance plan leaves off.

Some plans may waive the waiting period when you submit a second claim. So, if you have a chronic illness that prevented you from working for over 90 days, and you recovered within a year, but the illness came back, you may not have to meet the elimination period again. However, if your disability is caused by a different illness, you will need to meet the waiting period again. 

If you have enough savings to cover six months or longer without any income, you might consider a 180-day elimination period. It can be significantly cheaper than a shorter elimination period. If you don’t have a short-term plan or an emergency fund, you should choose an elimination period with a monthly premium you can afford. Then, start saving as much as you can, so you can have that emergency fund to cover the gap. 

If you are married and your spouse is working, a longer elimination period might work for you.