When you’re dealing with a disability that prevents you from working, navigating the complex relationship between private long-term disability (LTD) insurance and Social Security Disability Insurance (SSDI) can feel overwhelming. One crucial question that often arises is whether your LTD insurer can claim a portion of your SSDI backpay award.
Understanding the Offset Provision
Most long-term disability insurance policies contain what’s called an “offset provision” or “other income benefits” clause. This provision allows the insurance company to reduce your monthly LTD benefits by the amount you receive from other sources, including SSDI. The logic behind this is to prevent you from receiving more in total disability benefits than you would have earned while working.
When you receive SSDI backpay—the lump sum payment covering the period from your disability onset date to when your claim is approved—your LTD insurer may indeed have a legal right to recover some of these funds.
How the Recovery Process Works
If your LTD policy includes offset language, the insurer typically calculates how much they “overpaid” you during the period when you were receiving LTD benefits but before SSDI was approved. Since SSDI backpay covers this same period, the insurance company may seek reimbursement for the overlapping coverage.
For example, if you received $2,000 monthly from your LTD insurer for 18 months, but your SSDI award (including backpay) would have provided $1,200 monthly for the same period, your insurer might seek to recover $800 per month for those 18 months, totaling $14,400.
Important Limitations and Protections
However, LTD insurers cannot simply take your entire SSDI backpay award. Several factors limit their recovery rights. First, they can only recover amounts that exceed what they actually paid you in LTD benefits during the overlapping period. Second, many states have laws protecting a portion of SSDI backpay from creditor claims.
Additionally, the specific language in your policy matters significantly. Some policies may limit recovery rights or include other protective provisions.
Getting Professional Help
Given the complexity of these calculations and the substantial amounts of money often involved, it’s crucial to review your specific policy language and consult with an experienced disability benefits attorney or insurance specialist. They can help you understand your rights, negotiate with the insurance company, and ensure any offset calculations are accurate.
While LTD insurers may have legitimate recovery rights regarding SSDI backpay, understanding these rules can help protect your financial interests during an already challenging time.
