What is the purpose of elimination (waiting) periods in disability income policies?

The purpose of elimination (waiting) periods in disability income policies is to specify a limited period of time at the start of disability when benefits are not payable. This waiting period serves several functions within an insurance policy. It helps to manage the insurer's risk by ensuring that only those who have sustained a more prolonged disability claim will receive benefits, thereby discouraging claims for temporary or minor disabilities. By establishing this waiting period, insurers can keep premiums at a more affordable level for policyholders, as it reduces the number of shorter-term claims that would typically be paid out.

Furthermore, this period allows those who may be out of work for a short duration (perhaps due to temporary injuries or conditions) to return to work without needing a claim, ultimately maintaining the integrity and financial viability of the insurance pool. The waiting period can vary depending on the specifics of the policy, but it is typically set to balance the interests of the policyholder and the insurance company.