What is an Elimination Period?
The elimination period is a specified duration of time that must pass after an insured event occurs before the policyholder can start receiving benefits. Commonly seen in disability and long-term care insurance, this period acts similarly to a deductible but is based on time rather than money. During this waiting period, no benefits are paid, so policyholders are responsible for covering their own expenses until the period ends.
In term life and final expense insurance contexts, the elimination period plays a crucial role in determining when beneficiaries can start receiving the payout. Some policies may have a brief elimination period to ensure eligibility, meaning the insured must survive a certain period after the policy is activated for the death benefit to be valid.
For instance, a long-term care insurance policy might have an elimination period of 30, 60, or even 90 days after an individual becomes eligible for care. Shorter elimination periods generally lead to higher premiums, while longer ones might reduce the premium cost. Choosing the right elimination period depends on one’s financial situation and ability to cover expenses until benefits start.
Understanding the elimination period can help policyholders plan for the financial gap that might arise while waiting for their insurance benefits to kick in. By knowing what to expect, policyholders can better prepare for these interim costs.