What is the primary purpose of a waiting period in health insurance policies?

The primary purpose of a waiting period in health insurance policies is to prevent adverse selection from high-risk applicants. During a waiting period, which is a specified time frame before coverage for certain conditions or benefits takes effect, insurers protect themselves against individuals who might only seek coverage when they anticipate needing immediate care, particularly for pre-existing conditions.

By implementing a waiting period, insurers can encourage applicants to maintain continuous coverage, rather than selectively obtaining insurance after experiencing a health issue. This helps to stabilize the risk pool and ensure that premiums remain affordable for all policyholders. Furthermore, the waiting period discourages individuals with known illnesses from only purchasing insurance to cover their anticipated medical needs. This mechanism supports the insurance model, where risk is spread among all policyholders.