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Dave Ramsey says: Take longer elimination period for disability insurance

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Dear Dave,

I’m looking at long-term disability insurance policies. What does the term “elimination period” mean?

— Glen

Dear Glen,

The elimination period is, by definition, the time from the point you’re declared disabled by a doctor until you begin receiving payments from the insurance company.

If you have a 90-day elimination period, it will be about that long from the time you’re officially declared disabled until you see your first check.

I recommend 90- to 180-day elimination periods, depending on what kind of financial shape you’re in, and how much money you have stashed away in savings, investments, and your emergency fund.

If you have a fully-loaded emergency fund of three to six months of expenses — and you have little or no debt, plus other money stashed away — you should be able to carry a policy with a longer elimination period.

And remember, the longer the elimination period, the lower your premiums will be. Hope this helps, Glen!

— Dave

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