Question

The elimination period in a disability income insurance policy:

A. Describes how long the policy must be in force before claims can be considered.
B. Serves as a time deductible before benefits are payable.
C. Addresses where accidents and sicknesses must not occur for a claim to be payable.
D. Defines what causes of loss are eliminated from potential claim payment.

Answer 1

The elimination period in a disability income insurance policy functions as a time deductible, during which the policyholder must wait before disability benefits become payable after a claim.

Step-by-step explanation:

The elimination period in a disability income insurance policy is accurately described as option B: "Serves as a time deductible before benefits are payable." Comparable to a monetary deductible found in other insurance policies, the elimination period functions as a waiting period, not in terms of days or months, before a policyholder becomes eligible to receive disability benefits following a filed claim.

The length of this waiting period is predetermined in the policy and serves to mitigate moral hazard. By imposing a waiting time, the elimination period discourages misuse or overreliance on insurance claims, ensuring that policyholders have a genuine need for disability benefits and preventing frivolous or unnecessary claims. This mechanism contributes to the integrity of the disability income insurance system by aligning benefits with legitimate and verified instances of disability.