Long-term disability (LTD) insurance provides financial support to individuals who become disabled and cannot work for an extended period. When claimants file disability claims with a long term disability insurer, they may also apply for Social Security Disability benefits (SSDI).
In fact, most disability insurance policies require claimants to apply for Social Security Disability Insurance benefits. This ensures that the disability insurance company is not solely responsible for providing financial support to the claimant.
SSDI is a federal program that provides financial support to individuals who have become disabled and cannot work. If your SSDI claim is approved, you will receive monthly payments from the government to help cover their living expenses.
If a long term disability claimant begins receiving Social Security Disability, they may wonder if their insurance company can claim overpayment. The answer to this question depends on several factors.
Do I Have to Pay Back My Disability Benefits?
The first place to look when answering this question is the long term disability policy or plan that applies to your claim. Most policies – probably 99% of the one’s we review – allow the insurance company to reduce the “gross” LTD benefit amount by the amount of “other income”, which typically includes Social Security Disability income benefits. The resulting amount is often called the “net” LTD benefit. So you would want to see if your policy includes a reduction of benefits for the receipt of SSDI benefits.
Again, if and when SSDI benefits are approved, they will “offset” the LTD benefits. That means the SSDI benefits will decrease the amount of your long term disability benefits. This means they will reduce the amount of your monthly benefit by the amount of your SSDI payment.
If the LTD and SSDI claims are approved around the same time, the “offset” may be applied from the beginning. However, there are situations where the SSDI claim is approved much after the LTD claim is approved and there is a period of time when the “offset” is not being applied. Once the SSDI claim is ultimately approved, the insurance company may claim an “overpayment” and ask to be repaid.
For example, let’s say that you receive a lump sum payment of Social Security Disability benefits for back pay. Your insurance company may claim that they overpaid you based on the amount you received from the SSA. The insurance company will demand that the overpayment be repaid.
It is important to note that the insurance company must follow certain rules when claiming overpayment. For example, they must provide the claimant with written notice of the overpayment and an opportunity to dispute the claim. They must also provide the claimant with a reasonable repayment plan if the overpayment is valid.
If the claimant disagrees with the insurance company’s claim of overpayment, they can appeal the decision. This usually involves filing an appeal and providing evidence to prove that you should not be required to pay the overpayment.
In summary, there are some situations in which you may have to pay back some of your long term disability benefits. If you receive a lump sum payment from SSDI for back pay, the insurance company may claim overpayment. If you receive a notice of overpayment from your insurance company, be sure to read it carefully. You may be able to appeal the decision if you disagree with the insurance carrier.