Arizona Life and Health Practice Exam

What should Larry's individual disability income policy elimination period be if he is covered by a two-month wage continuation benefit from his employer?

1. 30 days

2. 60 days

3. 90 days

4. 120 days

The correct answer is: 60 days

The elimination period of an individual disability income policy is the duration that the insured must wait before benefits begin to be paid out. In this scenario, since Larry has a two-month wage continuation benefit from his employer, it acts as a short-term source of income while he is unable to work. Choosing a 60-day elimination period aligns with the existing coverage Larry has from his employer. The wage continuation benefit covers him for the first two months (or 60 days) of disability. By selecting a 60-day elimination period for his personal policy, Larry ensures that there is a seamless transition into his disability income policy once his employer's benefits end. This minimizes the risk of a gap in income during his disability, making it a practical choice. If Larry were to choose a shorter elimination period, he could end up paying for a benefit he might not need immediately, as he would already receive income from the employer's benefits during that time. Conversely, an elimination period longer than 60 days might leave him without coverage right after the employer's benefit terminates. The balance of aligning the personal policy's elimination period with the employer's benefit duration is essential for effective financial planning during a disability.