What is referred to as the waiting period in insurance?

The waiting period in insurance specifically refers to the timeframe that an insured individual must wait before benefits become available following the onset of a covered event, such as a disability or illness. This period is crucial because it establishes a lag time between the occurrence of the event and the initiation of benefit payments, thereby preventing the insurance company from having to pay out for immediate claims shortly after a policyholder has acquired coverage.

For example, in accident or sickness insurance, if a policy states that there is a 30-day waiting period, it means that benefits will only begin to be paid out after 30 days following the event that led to the claim. This helps to eliminate the potential for moral hazard, where individuals might be incentivized to make a claim immediately after purchasing insurance.

Understanding this concept is important for policyholders so they can plan accordingly, knowing that they will not receive benefits right away and may need to rely on other resources to cover expenses during that period.