A 90-day elimination period is usually the best way to get the protection you need while keeping your disability insurance policy affordable.
It’s important for any worker to protect their income with long-term disability insurance. But how do you ensure you’re not spending too much money to insure your paycheck?
One of the most common ways is to lengthen the elimination period, or waiting period. The elimination period determines when your disability insurance starts paying out, and the amount of time you choose makes a big difference in how much you’ll pay over the life of your long-term disability insurance.
A disability insurance elimination period is how long you have to wait before the insurance company will pay benefits. It might be easiest to think of it as a health insurance deductible. The longer you wait for disability benefits to kick in, the lower your premium.
Elimination periods range from 30 days to two years (typically 30, 60, 90, 180, 365, and 720 days) and the most common period of time is 90 days. Policies get cheaper with longer elimination periods because the number of illnesses and injuries that keep you from working for that long decreases. There is a high frequency of issues for short periods of time, but fewer for long periods. It’s why a short-term disability policy is much more expensive than long-term disability insurance, and why long-term disability insurance is so important: Low frequency, high liability risks are the most important times for insurance.
Once the elimination period is up, assuming the disability meets the definition of disability and isn't caused by a pre-existing condition that has been excluded, your benefits will be paid out.
Keep in mind the elimination period is not the same as a probationary period, a period during which you cannot file a claim. Learn more about the differences between elimination periods and probationary periods.
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The elimination period is one of the first things to consider if you must lower your premium. 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.
Elimination period | Monthly Premium | % difference from 90-day cost |
---|---|---|
30 days | $238.25 | +96% |
60 days | $204.94 | +69% |
90 days | $121.31 | N/A |
180 days | $107.06 | -12% |
360 days | $93.41 | -23% |
720 days | $83.31 | -31% |
For a comparable 50-year-old, the costs are higher but the premium differences between elimination periods are nearly the same:
Elimination period | Monthly Premium | % difference from 90-day cost |
---|---|---|
30 days | $553.16 | +97% |
60 days | $474.72 | +69% |
90 days | $280.41 | N/A |
180 days | $247.00 | -12% |
360 days | $215.12 | -23% |
720 days | $191.56 | -32% |
Genius tip
For most people, the sweet spot between cost and coverage will be a 90-day 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:
Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.
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Yes, we have to include some legalese down here. Read it larger on our legal page. Policygenius Inc. (“Policygenius”) is a licensed independent insurance broker. Policygenius does not underwrite any insurance policy described on this website. The information provided on this site has been developed by Policygenius for general informational and educational purposes. We do our best efforts to ensure that this information is up-to-date and accurate. Any insurance policy premium quotes or ranges displayed are non-binding. The final insurance policy premium for any policy is determined by the underwriting insurance company following application. Savings are estimated by comparing the highest and lowest price for a shopper in a given health class. For example: for a 30-year old non-smoker male in South Carolina with excellent health and a preferred plus health class, comparing quotes for a $500,000, 20-year term life policy, the price difference between the lowest and highest quotes is 60%. For that same shopper in New York, the price difference is 40%. Rates are subject to change and are valid as of 2/17/17.
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