Although extremely difficult on a personal level, most long-term disability claims based on a provable sickness or accident are relatively straightforward when it comes to insurance. A claim for long-term disability insurance is filed following a diagnosis or some life-altering event that directly impacts an employee’s ability to work.

That said, we all know that in matters of health, nothing is predictable. Insurance companies know this, too. This explains why long-term disability insurance is written with certain unique provisions called an Elimination Period and an Accumulation Period.

Remember, in its simplest form, long-term disability insurance is a bet. You are betting a long-term disability may happen, and the insurance company is betting it won’t. To make sure that a claimant doesn’t confuse a common cold with a long-term disability claim, an insurance company puts some hedges into that bet.

To illustrate this, think of the different types of sick leaves at work. If you have a cold or the flu, you may be off work for several days, but you are not “disabled,” in a contractual or occupational sense.  An employee might miss a week or even two weeks of work, and an insurance company wants to ensure that such a work absence is treated as PTO or sick leave.  

To accomplish this, the insurance company writes a long-term disability contract that contains an “Elimination Period,” or waiting period, before any such disability benefits are actually payable. Typically, an Elimination Period is 90 days or 180 days. During the Elimination Period, an employee is off of work but not actually collecting any insurance payment. (Also, many “long-term” disabilities resolve themselves in six months, as a result, sometimes this waiting period means an insurer never has to pay a claim).  In any event, if you have a long-term disability claim, you can expect to also have an “Accumulation Period.”

So, what is an Accumulation Period?  Here, again, health patterns tend to fluctuate.  An employee might have several “good days” where he or she is feeling well and can perform some work responsibilities, but that can be followed by a period of “bad days” where the opposite is true.  In a workplace setting, an employee might try to return to work, and then go back out again on leave.

It makes little sense to force employees to restart a new Elimination Period each time they return to a disability leave. So, the insurance company may include an Accumulation Period which serves as a another measuring period. This term means the total time period in which the Elimination Period can be satisfied.  An Accumulation Period may be 210 days or 365 days. This means that the total number of days in the Elimination Period must “accumulate” within that period.  If not, the disability is cleared out, and the employee starts a new waiting period. 

LTD Basics and Take-Away:

  • Long-term disability insurance contracts and benefit plans typically have Elimination Periods.  These are waiting periods.
  • The waiting periods are designed to differentiate between an employee who is out sick and an employee with an actual disability.
  • A longer period of time, called an Accumulation Period, sometimes up to one year, is allowed to satisfy the Elimination Period.
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