Navigating the complexities of disability benefits can be challenging, especially when figuring out how private long-term disability (LTD) insurance interplays with Social Security Disability Insurance (SSDI). Understanding the differences and interactions between these two benefit types is important for people dealing with the financial reality of not working due to a long-term disability.
If you are currently receiving monthly LTD benefits from a private insurance company or in the process of applying, chances are your LTD policy includes a clause that allows for a Social Security Disability offset. This means that if you're also eligible for SSDI benefits through the Social Security Administration (SSA), the amount your insurance company pays you in LTD benefits will be reduced by the amount you receive from SSDI.
Long-Term Disability (LTD) Insurance
LTD insurance is typically a private insurance policy offered as part of an employee benefit package or purchased individually. These disability policies are designed to replace a portion of an individual's income, typically 60% of their pre-disability earnings, if they become unable to work due to a medical condition.
The definition of disability and the terms of coverage can vary between policies, but typically a person must first be unable to perform their own job and then possibly unable to perform any kind of work.
One of the key components a person facing a long term disability insurance claim must understand is that most group LTD policies require the claimant to apply for SSDI, and any SSDI benefits received will likely offset the amount paid by the LTD insurer. This can be confusing but in short, your LTD benefit is reduced by what you are awarded for social security disability.
How does the offset work?
While on claim and being paid LTD benefits, the insurance company will, at some point, ask for proof of application for SSDI benefits. When you are approved for SSDI benefits, the disability insurance company first reduces your monthly LTD benefit by the amount of your SSDI benefit for you, and your dependents under 18.
For example, let’s say your monthly LTD benefit is $5,000 per month. Let’s say you are entitled to $2,500 in SSDI benefits and your dependent children are entitled to $1,200 in SSDI benefits (until they turn 18). That is a total offset of $3,700. Thus, your monthly LTD benefit is reduced from $5,000 to $1,300 per month. ($5, 000 - $3,700).
The other calculation that is done is the overpayment calculation for the gross LTD benefit already paid. The insurance company will calculate how much they overpaid you after applying the SSDI offset retroactively.
What If You're Not Yet Receiving SSDI?
Here’s where things can get tricky. Some insurance companies preemptively reduce your LTD benefits based on estimated SSDI payments, even if you haven’t been approved for SSDI yet. In some cases, people are not even receiving SSDI at all, yet their LTD benefits are still being reduced under the assumption that they eventually will.
If you’re in this situation, it’s essential to review your LTD policy carefully and seek legal advice. Insurance companies are not allowed to arbitrarily reduce your benefits without contractual justification. Dabdoub Law Firm offers to review such policies to determine whether the insurer is acting within their rights.
Don’t Rush to Repay an Overpayment Claim
If your insurer demands repayment due to an alleged overpayment, don't immediately cut them a check. You may be able to use the overpayment to your advantage. The specifics depend on your policy language and the timing of the SSDI approval as well as the future valuation of your claim.
In some cases, insurance companies may terminate your LTD benefits entirely due to the overpayment. If this happens to you, it's crucial to seek legal support right away to evaluate your options.
If you're dealing with confusing Social Security Disability offsets or facing an LTD overpayment demand, don’t navigate it alone. Dabdoub Law Firm focuses exclusively on long-term disability claims and has a proven track record of holding insurance companies accountable nationwide. The team understands the fine print of disability insurance policies and knows how to challenge wrongful benefit reductions or terminations. Let their expertise work for you Contact Dabdoub Law Firm today for a free policy review and personalized guidance. Your benefits deserve protection.