By Joe Dyton, WCI Contributor
Did you know one out of seven doctors eventually have to use their disability insurance? Odds like that mean it’s critical that you have adequate disability coverage; losing the ability to earn money to support you and your loved ones is one of the biggest, and most expensive, risks physicians face. Your ability to work and earn income is your most valuable asset.
Having disability insurance is just the first step of the process, however. It’s also important to understand how it works and what is the right amount of coverage for your needs. This includes determining how long of an elimination period you need to have, which we’ll cover below.
What Is the Disability Insurance Elimination Period?
The disability insurance elimination period is the amount of time between an injury and when the injured party can receive benefit payments from their insurer. The elimination period is also known as the waiting or qualifying period. Typically, disability insurance policies request policyholders to qualify throughout the elimination period—they must be hurt, sick, or disabled during this time.
The Probationary Period
Similarly, the probationary period requires that disability insurance policies don’t pay out benefits for a certain period of time after the policy begins. The probationary period typically lasts 15-30 days, and it's meant to prevent the policy from covering a policyholder’s disability that was the result of a preexisting condition.
While the elimination and probationary periods involve a certain amount of waiting, they are not the same. In fact, many long-term disability insurance policies do not have a probationary period. They are more common in health insurance policies. Meanwhile, long-term disability insurance policies allow policyholders to file a claim whenever they need to, even if it’s the day after the policy is purchased.
The Accumulation Period
Accumulation periods are the time from when disability benefits begin and the policyholder has to satisfy the elimination period. This time period is often twice the length of the elimination period—during which time you’ll be considered disabled if your illness or injury keeps you from performing your day-to-day work duties as usual. It’s often required that you’re under a physician’s care during the accumulation period, as well.
Important note about the elimination period in relation to the accumulation period: the elimination period does not have to run for consecutive days. So, if your elimination period is 90 days and you return to work after 30 and find you cannot perform your duties, you don’t lose “credit” for those 30 days. Your new elimination period would just be 60 days.
Basically, the accumulation period is the time period in which you can meet the elimination period. So if your accumulation period is 180 days and your elimination period is 90 days, you have to be disabled for 90 total days during any 180 day period to qualify for benefits.
How Long Is the Elimination Period on a Disability Insurance Policy?
The disability insurance policy will dictate an elimination period’s length. An elimination can last from 30-365 days, depending on the policy, although 90 days tends to be the standard. One benefit of a longer elimination period is it can lower your overall premium as shorter elimination periods often come with a higher insurance premium. Additionally, it’s possible to cover the elimination period through a short-term disability plan that might be available to you through your work or your own savings.
More information here:
The Disability Insurance Process
Is the Elimination Period Different Between Short-Term vs. Long-Term Disability?
When you receive your benefits is perhaps the biggest difference between short-term and long-term disability insurance’s elimination periods. Short-term disability insurance policies start to pay benefits a few weeks after a qualifying sickness or injury. However, the elimination period for long-term disability insurance is much longer—usually about 90 days in comparison.
If you plan to purchase a disability policy, consider how you’ll pay for any expenses you’ll incur during the elimination period. If you have an emergency savings account to cover lost income and medical bills, that’s great. Otherwise, you may have to buy extra coverage so you have funds on hand right away.
When Does the Elimination Period Start?
The elimination period starts on the day that your sickness or injury leaves you unable to work. If you were to file a disability insurance claim a month after your injury, the elimination period would start on the accident date, not the day that you filed.
If you need your disability benefits sooner rather than later, file your claim as quickly as possible. That’s because you might not receive your first check as soon as the elimination period ends—it might be another 30 days before you get your benefits. So, if you pick a 90-day elimination period, you could be covering expenses out of your own pocket for nearly four months.
Monthly Premiums and the Elimination Period
Remember, the standard elimination period for disability insurance is 90 days. You can adjust this length if you’re concerned about your monthly premium payments, however. Your policy becomes less expensive the longer your elimination period is. That’s because the amount of sicknesses and/or injuries you could sustain that would prevent you from working decreases over the course of a long elimination period.
The downside to a longer elimination period is that if you need to enact your policy, every month you’ve extended that period is another month of expenses you have to cover on your own. You have to weigh your alternatives. On one hand, a longer elimination period keeps your premiums low, but you’re facing a longer out-of-pocket period if you get hurt or sick and can’t work. On the other, a shorter elimination period is more expensive upfront, but you will receive your benefits sooner after an accident.
Managing Finances During Your Disability Elimination Period
You can eliminate the worry of deciding how long to make your elimination period by having an emergency fund that can cover the first 90-120 days you’re out of work. A savings fund of 3-4 months will make it so you don't have to pay extra to get a shorter elimination period. Also, be sure to look at how much you can save on elimination periods that are longer than 90 days. There’s typically not much savings to be had when you jump from 90 days to 180 days, which is why we generally recommend the standard 90-day elimination period.
More information here:
When Is It OK NOT to Buy Disability Insurance?
Have more questions about disability insurance and what kind of policies would be the best for you? Hire a WCI-vetted professional to help you sort it out.
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