Understanding the Elimination Period
For disability insurance, the time between when you make the claim and when you begin to receive benefits is usually called the “elimination period” or the “grace period.” This time can range from 30 to 720 days, depending on your policy.
Most insurance policies have elimination periods between 60 and 120 days. The longer your elimination period, generally, the lower the premium costs will be. This is because many disabilities are for less than a year, so the more of that year that is eaten up without benefits paid, the less in total benefits that will be paid.
How long you want your elimination period to be will depend on your financial situation. If you can go a substantial amount of time without an income, then you should consider a longer elimination period in order to save on premiums. If you cannot do this, you should pay the extra to get a shorter elimination period.
Regardless, part of your disability insurance should be your own savings plan. You should have enough savings to at least cover the elimination period on your policy—more is better, of course.
The other thing to watch for with elimination periods is the way they’re calculated. If your policy has residual disability coverage, but does not consider the elimination period beginning until you make a full disability claim, your policy has a serious loophole that will mean you may not begin receiving benefits until much later than you thought.
It’s advisable to always have your elimination period begin counting from the day you make a partial or full claim.