In a disability policy, what does the probationary period indicate?

In a disability policy, the probationary period signifies a specific timeframe during which claims for illnesses that result in disabilities are not covered. This means that if a policyholder becomes disabled due to an illness during this period, they will not receive benefits for that disability. The purpose of the probationary period is to prevent individuals from purchasing disability insurance in anticipation of a known or imminent illness.

This period typically applies only to illnesses and not to disabilities resulting from accidents. By having a probationary period, insurers can mitigate the risk of adverse selection, where individuals with preexisting conditions are more likely to seek coverage. As a result, the probationary period provides both the insurer and the insured clear guidelines about the beginning of coverage for illnesses, ensuring that the insurance can function sustainably.