Massachusetts Health & Accident Insurance Practice Exam

Which statement best describes an Elimination Period in disability insurance?

1. It reduces premiums for policyholders

2. It is the waiting time before benefits commence

3. It signifies the maximum benefit duration

4. It outlines the steps for filing a claim

The correct answer is: It is the waiting time before benefits commence

The statement that an Elimination Period in disability insurance is the waiting time before benefits commence accurately captures its definition and purpose. This period is essentially the time frame a policyholder must wait after becoming disabled before they begin to receive their disability benefits. For example, if a policy has a 30-day elimination period, the insured would need to be disabled for 30 days before the insurance company starts to pay out benefits. Understanding the elimination period is crucial for policyholders, as it can significantly impact their financial planning in case of a disability. A longer elimination period may result in lower premiums, as the insurer takes on less immediate risk, but can also mean a longer wait for the insured to receive benefits. In contrast, the other options address different aspects of disability insurance, such as premium adjustments, benefit duration, or claims filing procedures, which do not specifically relate to the elimination period.