Illinois Health Insurance Practice Exam

What purpose does the Waiting (elimination) period provision serve in disability income insurance policies?

1. To delay any benefit payments indefinitely

2. To determine the severity of the disability

3. To reduce the premium with a longer period

4. To increase the premium with a longer period

The correct answer is: To reduce the premium with a longer period

The Waiting (elimination) period provision in disability income insurance policies serves several key purposes, but one of the main objectives is to reduce the premium costs when the insured chooses a longer waiting period. This is because a longer waiting period means that the insurance company retains the risk for a longer duration before it starts to pay benefits. Consequently, the insurer can offer lower premiums, making the policy more affordable for individuals who are comfortable with waiting longer before receiving benefits. This provision also helps to ensure that coverage is utilized for significant, long-term disabilities rather than short-term or less severe conditions, which further contributes to the overall cost management of the insurance plan. While the waiting period can affect other factors like policy usage and eligibility, its primary role in lowering premium costs is significant.