Life and Health Insurance · Accident and Health Insurance · 5 min read
Waiting Periods and Premium Waivers
- Distinguish between probationary periods, group eligibility waiting periods, and elimination periods.
- Explain how elimination periods operate as time-based deductibles in disability income and long-term care insurance, including the role of recurrent disability provisions.
- Describe the operation, waiting periods, qualification requirements, and premium handling of the waiver of premium provision.
Probationary Periods and Group Eligibility Waiting Periods
In insurance policies that include one, a probationary period is a specified time after coverage takes effect during which sickness losses are not covered. This is not a general feature of ACA-compliant major medical coverage. When a sickness probationary period is permitted, its length is specified in the policy and varies by product. If a sickness begins during a policy's probationary period, benefits for that sickness may be excluded under the policy terms.
The primary purpose of a probationary period is to protect the insurer against adverse selection. A sickness probationary period helps protect an insurer against claims from individuals who seek coverage after noticing early symptoms, subject to the rules that apply to that type of coverage. In contrast to sickness losses, covered accidental injuries are generally covered from the policy effective date.
You must distinguish a sickness probationary period from an employer's eligibility waiting period in group health coverage. In group health coverage, an employer's eligibility waiting period is the time an otherwise eligible employee must wait before coverage can begin. Federal law generally limits this group eligibility waiting period to 90 days.
Common mistakes
- Assuming an insured can immediately stop paying premiums once a disability occurs, without checking when the waiver takes effect and which premiums remain due.
- Confusing an elimination period with a monetary deductible; an elimination period is a time deductible measured in days, not dollars.
- Believing that an insured must pay back the insurer for premiums waived during a covered period of total disability once they recover.
- Confusing a sickness probationary period with an elimination period; under a sickness probationary provision, covered accidental injuries are generally covered from the policy's effective date.
Key points
- A probationary period applies when a policy takes effect, excluding sickness losses for a set time to combat adverse selection, while accidental injuries are generally covered immediately.
- Federal law generally limits employer eligibility waiting periods for group health coverage to a maximum of 90 days.
- An elimination period serves as a time-based deductible in disability income and long-term care policies, where longer periods lower premiums and shorter periods raise them.
- Benefits do not accrue during an elimination period, and payments are typically made in arrears once the elimination period has been completed.
- A recurrent disability provision may treat a disability from the same or a related cause as a continuation of the earlier disability if it recurs within the contractual timeframe; any unfinished part of the original elimination period may still apply.
- Waiver of premium excuses qualifying premiums once the policy's conditions are met; qualification rules and any waiting period vary by policy and type of coverage.
- If the insured meets the policy's waiver conditions, qualifying premiums are excused for the period specified in the contract; some contracts refund premiums paid during a waiting period, and waived premiums do not have to be repaid.
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