Waiting is the hardest part

May is Disability Insurance Awareness month so this week's post continues on the DI theme.  The waiting period (also know as the elimination period) is an important factor with disability insurance.  This acts like a deductible – how many days you have to wait before the insurance company begins paying your benefits.  The longer your elimination period, the lower your premiums will be.  For short-term plans, a 0 day or 7 day elimination period is used most often.  For long-term plans, common elimination periods are 30 days, 60 days, or 90 days.  Most financial planners will recommend that clients have an emergency fund sufficient to cover the elimination period plus 30 days in case the insurance company is not timely with their payments. 

 A misconception I hear often is: “I have been disabled now for 30 days and satisfied my elimination period, when can I expect my check?”  Your clock to receive benefits starts after the elimination period.  In a hypothetical situation, if you are disabled for 90 days with a 30 day elimination period, your income will be replaced for 60 days.  And the income replacement is pro rata, based on how many days you are off work.  Even though your benefit may be stated in a monthly figure, it’s more like a payment per day off of work.     

This is another reason that you should review your disability policies, to make sure you understand how the benefits will be paid and make any adjustments if you need to.