Disability Elimination Period

In insurance, the elimination period (also known as waiting period) is the time between the onset of a disability and when the policy's benefits start to be paid out. The purpose of the elimination period is to avoid paying out for temporary disabilities, and to avoid moral hazard where individuals are incentivized to take out insurance only when they anticipate a short-term disability.

A disability elimination period can range from a few days to several months, and can be customized to fit the policyholder's needs. A shorter elimination period will typically result in higher premiums, as the insurance company is at a higher risk of having to pay out benefits.

Here's an example: John has a disability insurance policy with a 30-day elimination period. He becomes disabled and is unable to work on January 1st. His policy benefits will start to be paid out on February 1st, 30 days after the onset of his disability.

Key features of a disability elimination period include:

• The length of the elimination period can be chosen by the policyholder when the policy is purchased.
• A longer elimination period will typically result in lower premiums, as the insurance company is at a lower risk of having to pay out benefits.
• The elimination period applies each time the policyholder becomes disabled, not just once.
• The elimination period only applies to disabilities that are covered by the policy.