What You Should Know Before You Read:
- Most long term disability policies reduce your monthly benefit when you receive income from other sources such as SSDI, workers compensation, or retirement benefits. These reductions are called offsets.
- Approval of other income can lead to an overpayment, meaning you owe the insurance company money. These demands can be sudden and financially overwhelming.
- Understanding how offsets work and how overpayments are calculated can help you prepare for a potential financial hit.
- Dabdoub Law Firm focuses exclusively on disability and life insurance claims, representing clients nationwide with proven success in federal court.
Understanding Long-Term Disability Offsets and Overpayments
Long term disability insurance policies often contain provisions that allow the insurer to reduce, or offset, your monthly LTD benefit when you receive certain types of income. The goal is to prevent “double recovery,” meaning you cannot get both LTD benefits and other income because you are disabled, but in practice, offsets almost always benefit the insurance company.
The most common offsets come from Social Security Disability Insurance, workers compensation, personal injury settlements, and certain employer provided retirement benefits. When these income sources are awarded, the insurer will recalculate your past payments and claim that it overpaid you. They will also adjust your ongoing monthly benefit, reducing what you get in other income from your LTD benefit. Many claimants only learn about these issues after receiving a repayment demand for thousands of dollars.
Knowing what to expect and how to respond can protect your benefits and prevent avoidable financial strain. The following do’s and don’ts will guide you through the process.
1. Do Understand Which Income Sources Reduce Your LTD Benefit
Not all income sources result in an offset, and not all policies treat offsets the same way. Everything depends on the specific language in your plan.
Do:
- Read your policy carefully to identify deductible income sources.
- Confirm whether SSDI, dependent benefits, workers compensation, or retirement benefits are included.
- Keep records of when each benefit begins so you can confirm any recalculations.
Do Not:
- Assume every dollar you receive from another source reduces your LTD payment.
Some insurers apply offsets incorrectly, and you have the right to question mistakes.
2. Do Prepare for Overpayments After SSDI Approval
SSDI awards often include large retroactive payments. Because LTD insurers typically offset a SSDI benefit they will almost always claim an overpayment when your SSDI benefits begin.
Do:
- Expect the insurer to request repayment.
- Contact the insurer for a written breakdown of how it calculated the overpayment.
- Compare the dates, payment amounts, and policy provisions to ensure accuracy.
Do Not:
- Assume the insurer’s calculation is correct. Overpayment amounts are frequently wrong, especially when dependent benefits are involved or policy language is misinterpreted.
3. Do Request a Written Calculation Before Paying Anything
By law and by contract, insurers must provide a precise explanation of why they believe you owe money, including a monthly breakdown of the benefit paid and the offset applied.
Do:
- Insist on receiving the overpayment calculation in writing.
- Review the relevant policy sections to confirm the insurer’s interpretation.
- Ask questions about any discrepancies or unclear dates.
Do Not:
- Make a repayment before confirming that an overpayment truly exists. Some claims are negotiable, others are incorrect, and in some situations, repayment may not be legally required.
4. Do Explore Repayment Options if an Overpayment Exists
Even if you owe an overpayment, you are not required to repay it all at once unless you agree to do so and have the money sitting in a bank account
Do:
- Ask the insurer about repayment plans.
- Request a reasonable monthly reduction instead of an immediate lump sum.
- Get any agreement in writing so there are no misunderstandings later.
Do Not:
- Allow the insurer to withhold one hundred percent of your LTD benefit.. You have the right to negotiate repayment terms that prevent financial hardship.
5. Call Dabdoub Law Firm Early in the Process
Offset calculations and overpayment demands are among the most complex aspects of LTD claims. Even small errors can lead to large and unfair repayment requests.
Do:
- Involve an experienced disability insurance attorney as soon as you receive a repayment demand.
- Have your attorney review the policy language, calculation sheets, and claim file.
- Allow your attorney to negotiate directly with the insurer to protect your financial stability.
Do Not:
- Handle the process alone or wait until you are already facing aggressive repayment efforts. Early guidance prevents mistakes and strengthens your ability to challenge incorrect demands.
How Dabdoub Law Firm Can Help
Offsets and overpayments can be stressful, confusing, and financially damaging. Even when the insurer is entitled to an offset, many overpayment demands are calculated incorrectly or imposed unfairly.
Dabdoub Law Firm represents clients nationwide in all aspects of long term disability claims, including complex issues involving offsets and overpayments. Our attorneys help with:
- Reviewing LTD policies and identifying deductible income sources
- Challenging incorrect or excessive overpayment demands
- Negotiating repayment plans that protect financial stability
- Coordinating LTD and SSDI claims to avoid preventable disputes
- Filing or appealing LTD claims that involve offset related complications
- Litigating these issues in federal court when necessary