POLICY PROVISIONS

Probationary Period 

            The probationary period is the time that must elapse after the effective date of a policy before benefits are payable.  The probationary period ranges from 15 to 30 days.  The reason for the probationary period is to avoid adverse selection for the insurer by excluding pre-existing sicknesses from coverage.  The probationary period only applies to sickness and does not apply to accident.  A person could be aware of a potential sickness disability, but an accident disability cannot be anticipated or predicted.

Elimination Period 

            The elimination period is a waiting period after an insured suffers a covered disability until benefits become payable.  It can be thought of as a deductible in time.  In some disability income contracts, the elimination period may apply only to disabilities caused by an illness and not to disabilities caused by an accident.  Elimination periods range from 30 days to one year.  An insured will need to determine how long he/she can go without an income.  The longer the elimination period, the lower the premium.

Benefit Period

            The amount of time for which benefits will be paid is the benefit period.  Benefit periods can range from several months to age 75 or older.  The longer the benefit period, the higher the premium. 

            A short-term disability income policy provides benefits for a temporary period of time defined in the policy (usually for several months to two years).  The likelihood is that the insured can return to work or restore lost income. If a policy pays benefits for two years or longer, it is normally considered long term.  The likelihood is that the insured cannot return to work or restore the lost income.  Most short-term policies cover non-occupational disabilities. Most long-term policies cover both occupational and non-occupational sickness and injuries.  Occupational benefits will be reduced by any benefit amounts received through other sources such as workers compensation and Social Security.

            When considering purchasing disability insurance, a person needs to weigh objectives and finances.  Since short-term disability policies pay for a limited time period,  it will cost less than a long-term disability policy.   It also will have a shorter elimination period.  The person considering buying a short-tem disability policy might have long-term disability coverage through an employer and have limited savings to cover the first few months of disability necessitating lower monthly premiums. A long-term disability policy gives the purchaser peace of mind knowing that benefits will last to a certain age or as long as the disability lasts, but it will be more expensive and have a longer elimination period.  The long-term policy could fit the needs of a working person with a family to consider if he can afford it.  This person might also wish to have a short-term disability policy to cover the time from suffering a disability until benefits from the long-term policy start paying a benefit.

EXCLUSIONS 

            Common exclusions in disability income policies include losses arising from war and military service, attempted suicide, overseas residence, piloting a private plane or being a crew member in a private plane, and injury sustained while committing a felony.  Pre-existing conditions may be excluded.  The Patient Protection and Affordable Care Act's prohibition of pre-existing conditions only applies to health insurance.