Many people who receive long-term disability (LTD) insurance benefits also apply for Social Security Disability Insurance (SSDI). While receiving benefits from both programs is often possible, many claimants are surprised to learn they may have to repay a portion of their long-term disability benefits after their Social Security claim is approved.
The reason is that most long-term disability insurance policies contain a provision allowing the insurance company to offset, or reduce, LTD benefits by the amount you receive from Social Security Disability Insurance. The purpose of the offset is to prevent claimants from receiving more than the percentage of income replacement provided under the policy.
The timing of Social Security approvals often creates the repayment issue. Many people begin receiving long-term disability benefits months or even years before the Social Security Administration approves their SSDI claim. Once approved, SSDI frequently includes a lump-sum payment for past-due benefits covering the period during which the claimant was already receiving LTD benefits.
If your LTD policy includes a Social Security offset provision, the insurance company may determine that it paid more in benefits than it should have during the months covered by the retroactive SSDI award. As a result, the insurer may seek reimbursement for that overpayment. In many cases, the amount owed is deducted from the SSDI back-pay award or repaid directly to the insurance company, depending on the circumstances and any agreements you signed during the claims process.
Not every disability policy is the same, however. The language governing offsets, overpayments, and reimbursement obligations varies from policy to policy. Some policies also allow offsets for Social Security benefits received by your spouse or dependent children based on your disability, while others do not. Understanding exactly what your policy requires is essential before agreeing to repay any amount requested by your insurer.
If your insurance company claims you owe an overpayment, do not assume the calculation is correct. Errors can occur, particularly when insurers calculate offsets, account for attorney’s fees paid from your SSDI award, or determine the period covered by retroactive benefits. Reviewing the insurer’s calculations and the policy language can help ensure you are not asked to repay more than you actually owe.
If you have questions about a reimbursement demand or your long-term disability benefits have been reduced after your Social Security claim was approved, consulting an experienced long-term disability attorney can help you understand your rights and protect your financial interests.
