Certified Financial Consultant (CFC) Practice Exam

Which of the following is a characteristic of the elimination period?

1. Benefits begin immediately

2. It lasts indefinitely

3. It is a waiting period before benefits are payable

4. It varies by insurance provider

The correct answer is: It is a waiting period before benefits are payable

The characteristic of the elimination period that makes it a defining feature in many insurance policies, particularly disability insurance, is that it serves as a waiting period before benefits become payable. During this elimination period, the insured must wait a specific amount of time following the onset of a qualifying event, such as an illness or injury, before they can start receiving benefits. This period allows insurers to assess claims and helps to prevent short-term claims, thereby managing costs and risk more effectively. The elimination period is typically specified in the policy documents and varies from one insurance provider to another, but the key aspect is that it is a clearly defined period during which no benefits are paid, establishing a clear threshold for when coverage kicks in. Understanding this concept is crucial, as it impacts how soon an individual can expect financial support following a disabling event.