California Accident and Sickness Practice Exam

The elimination period in a disability income policy is designed to serve a function comparable to a deductible in a medical expense policy. This period refers to the time between when a policyholder becomes disabled and when they begin to receive benefits. By requiring an elimination period, the insurer and the insured can share the risk associated with the financial hardship caused by a disability.

Just as a deductible in a medical policy requires the insured to bear some initial costs before coverage kicks in, the elimination period ensures the policyholder manages a certain period of disability without immediate financial support, thereby reducing the insurer's overall risk. This leads to lower premiums for the policyholder. The mechanism helps to prevent small or temporary disabilities from generating claims and allows the insurance to focus on more significant, longer-term financial impacts of disabilities.

The other options do not define the purpose of the elimination period correctly. Options related to premium calculation and determining eligibility for coverage focus on the initial stages of obtaining a policy rather than the function of the elimination period. Immediate benefits clearly contradict the very nature of the elimination period, as it specifically delays the start of benefits.