Elimination periods in disability insurance

When you buy long-term disability insurance to protect your income, you'll need to choose an elimination period, also known as a waiting period. The elimination period determines when your disability insurance starts paying out after you file a claim.

The length of your elimination period impacts how much you'll pay for your disability policy — the shorter the period, the higher your rates. A 90-day elimination period is right for most people because it balances affordability with your need for coverage.

What is the elimination period of an individual disability insurance policy?

A disability insurance elimination period is how long you have to wait before the insurance company will pay benefits. The longer you agree to wait for disability benefits to kick in, the lower your premium will be.

Elimination periods range from 30 days to two years (typically 30, 60, 90, 180, 365, and 720 days) and the most common period is 90 days. Policies with longer elimination periods have lower premiums because the likelihood that your insurer will need to pay benefits decreases.

Once the elimination period is up, assuming your condition meets the definition of disability and isn't caused by a pre-existing condition that has been excluded, your benefits will be paid out.

→ Read about how long disability benefits last

Elimination period vs. probationary period

Keep in mind the elimination period is not the same as a probationary period — a period during which you cannot file a disability claim.

Most long-term disability insurance policies do not have probationary periods. They're found on other types of insurance. For example, a probationary period in health insurance is the time before coverage takes effect, usually in an employer group plan. But when it comes to long-term disability insurance, you’re covered as soon as you purchase your policy and could file a claim the next day if needed.

Your health insurance has a deductible, which you need to pay before your coverage kicks in. For long-term disability insurance, the elimination period is like a time-based deductible: It’s the waiting period before benefits begin, counting from the day you became ill or injured.

How elimination periods affect insurance premiums

The elimination period is one of the first things to consider if you need to lower your premiums and get more affordable disability coverage. The loss of a few months of benefits is inconvenient, but the alternative is sacrificing the benefit amount and coverage for the remainder of your working years.

A longer elimination period means lower premiums. But what exactly does that look like? It helps to see an example.

In this case, we’re taking a look at a sample 30-year-old male software engineer in New York who is getting a $5,000 monthly benefit until age 65 with Guardian.

For a comparable 50-year-old, the costs are higher but the premium differences between elimination periods are nearly the same:

If you're shopping for an insurance, a licensed agent at Policygenius can help you get disability quotes and find an affordable policy.

What is the right elimination period?

So what’s the right elimination period length for you? It depends on your financial situation, and how long you can afford to make it.

If you have a short-term disability plan through your employer, you should pick an option that lines up with that benefit period. Your long-term disability insurance should pick up where the short-term insurance leaves off.

If you have liquid savings that can cover six months or longer of no income, a 180-day elimination period can be significantly cheaper than a shorter period. If you don’t have a short-term plan or an emergency fund, it’s important to choose an elimination period in conjunction with a monthly premium you can afford, and start saving right away to cover the gap.

If you have a spouse whose income could support you both when you’re not working, you may be more comfortable elongating the benefit period.

For most people, the sweet spot between cost and coverage will be a 90-day elimination period. If you’re unsure of what will work for you, talk to a licensed expert. They’ll be able to help you figure out your expenses and savings and recommend an elimination period that’s best for your financial situation.

→ Learn more about how much disability insurance you need

Three other things to consider when you’re deciding on your elimination period:

• The elimination period doesn’t start on the date you file a claim, but rather the date of the injury or diagnosis and once you’re unable to work because of it. For instance, if you were in a car accident, left unable to work and filed a claim 30 days after the accident, the elimination period would begin the day of the accident.

• Sometimes, your first disability check won’t arrive until 30 days after the elimination period has ended. That means, even if you choose the recommended 90-day elimination period, it might be four months until you receive your first benefit. Keep that in mind when you’re thinking about how long you can live off of your savings and emergency fund.

• Elimination periods can accumulate. If you're out of work for a period of time, try to go back, and realize you can't, the elimination period doesn't start over - it just continues from where you left off.