What is Deferred Period?

Full Definition

The deferred period (sometimes called a waiting period) is the length of time that must pass after a policyholder becomes unable to work, or is diagnosed with a qualifying condition, before an income protection or similar protection policy begins paying out -- commonly ranging from as little as four weeks up to twelve months, chosen by the policyholder when taking out the cover. A shorter deferred period means cover starts paying sooner if needed, but comes with a higher premium, while a longer deferred period reduces the premium but means the policyholder needs to be able to cover their own outgoings for longer out of savings, sick pay or other resources before the policy income begins. Choosing a deferred period sensibly usually means matching it to how long other support would realistically last -- for example, an employee entitled to several months of full contractual sick pay from their employer might reasonably choose a longer deferred period on a personal income protection policy, since the employer's sick pay would bridge the gap, whereas a self-employed person with no employer sick pay to fall back on, only statutory sick pay if eligible, might prefer a shorter deferred period despite the higher cost. The deferred period is distinct from the policy term (how long the cover itself lasts) and from any limit on how long benefits are paid once a claim starts, both of which are separate features to check when comparing income protection or critical illness policies.

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