What is a Benefit Period?

A benefit period is an amount of time covered by benefits such as payouts from life insurance, government-funded pension plans, and so forth. Benefit periods vary in length depending on the terms of the contract associated with the benefits, and people selecting insurance products may be asked to choose between several benefit periods when the policy for the insurance is generated. During the benefit period, people will receive regular payments or other benefits as part of the agreed-upon terms of the benefits plan.

Depending on how benefits are structured, there may be a waiting period before benefits take effect, or they may start immediately. With something like disability insurance, the policyholder usually needs to be out of work for at least a month, with documentation of disability, before a payout will happen. Conversely, other benefits kick in automatically when a triggering event such as reaching a certain age occurs.

In the case of insurance policies and pension plans, failing to pay can result in disruption of benefits such as a reduced benefit period. People with health insurance who don't pay premiums will not receive coverage until they sign up again, and people with pension plans may receive reduced benefits if payments into the plan were not made on a regular basis. Most plans come with a description of the benefits period and information on how to keep the plan current and avoid delays and reductions in payments.

When considering benefits plans, people may want to think about how they plan to use the benefits when selecting a benefit period. The longer the coverage with benefits, the more costly the plan tends to be. Stopgap coverage, such as short policies covering times when people would not otherwise be covered can also be obtained; for instance, if there's a two-year waiting period for disability benefits on a person's primary benefit plan, people can buy disability insurance with a two-year benefit period to get coverage while they wait to qualify for benefits.

Insurance agents and personal finance advisors can discuss benefits options with people considering the purchase of a benefits plan and help people select the period most suited to their needs. It may be possible to adjust a plan in the future if needs change and people may want to ask if there are penalties or other issues that may come into play if they need to change the terms of a benefits contract.