The answer in some cases is, unfortunately, yes. Say that you are receiving long-term disability (LTD) benefits and then get a lump sum back payment from the government for Social Security Disability Insurance (SSDI). Your insurance company may try to collect that lump sum. The insurer will claim that they overpaid your benefits.
If you’re unable to work for a long period of time, you’re counting on every dollar you get to take care of necessities. Attorney Tom Sinclair can help when insurers try to take money from honest, hard-working people who are just trying to get by.
Let’s explore overpayments and offsets, and what you can do to hold on to your income benefits. If you’re currently getting pushed around by an insurance company, we want to step in and push back. For a free claim review with a tough and experienced Alabama insurance lawyer, contact our Birmingham law firm today. You can also call Sinclair Law Firm at (877) 249-0091.
Social Security Disability Insurance (SSDI) vs. Long-Term Disability Benefits (LTD)
Let’s first look into how Social Security Disability Insurance and long-term disability insurance differ.
Social Security Disability Insurance is provided by the federal government through the Social Security Administration. Long-term disability benefits, on the other hand, are provided by private insurance companies. For many people, these benefits are often provided through their employer, though individual plans are also available.
Since SSDI and LTD have two different providers, many private insurance companies attempt to reduce their payouts by noting income through SSDI.
And here’s the kicker: many long-term disability policies require you to also apply for disability benefits through the Social Security Administration. It’s like they’re setting their customer up for frustration.
Can My Insurer Really Take My SSDI Lump Sum Payment?
Yes.
You are allowed to apply for both long-term disability insurance and Social Security Disability benefits. It can take time for you to be approved for SSDI. In the interim, you may be receiving regular long-term disability benefits.
When you finally get approved for SSDI, the Social Security Administration may send you a lump sum payment for the benefits you are owed based on when you applied.
Your long-term disability provider will likely use the offset clause in your policy to demand that you pay your lump sum to them. The insurance company will claim that they overpaid you.
What Is an Offset?
In the simplest terms, an offset is a reduction in your insurance benefits because you are receiving income from another source.
In the case of long-term disability coverage, the insurance company will argue that they would not have paid as much as they did had they been aware of your other source of income through SSDI.
Other Reasons You May Have to Pay Back Your Benefits
SSDI is just one reason many Alabamians face these frustrations involving overpayments and offsets. Here are other reasons your insurance provider may demand back pay or an offset:
- You’re Able to Return to Work: Long-term disability is meant for people who are unable to earn a wage. If you’re able to go back to work, even part-time or remotely, it could affect your long-term disability benefits.
- You’re Receiving Other Income Benefits: If you receive any workers’ compensation, state disability benefits, or other type of income, your insurance company may ask for reimbursement.
- Your Insurer Claims There Is an Error: The insurance company may say that they made a mistake in paying you long-term disability benefits. They’ll demand repayment even though their error was not your fault.
An Example of an Offset Affecting LTD and SSDI
Let’s say that you get into a bad car wreck on Interstate 65. While you’ve survived, your injuries are so catastrophic that you are unable to work for a very long period of time. You may even have a permanent disability that prevents you from working.
You have the medical documentation and proof of this severe injury, so you file a long-term disability claim with your employer-provided coverage. You also apply for SSDI since you are entitled to do so by the government, and because your LTD policy requires it. You get approved for long-term disability coverage for $2,000 a month, and then you get approved for SSDI coverage at $1,000 a month.
You’d assumed that you would receive $3,000 in combined disability benefits every month. But that isn’t how things work in the current system.
In the situation outlined above, your insurance company can come to you and say, “Since you receive $1,000 a month in SSDI, that offsets what we have to pay you for long-term disability. You’ll now receive only $1,000 a month in long-term disability coverage.”
Can Long-Term Disability Benefits Be Offset by VA Disability Compensation?
Sometimes, but not always. This depends on the language of your long-term disability policy.
Many policies will list other income benefits that may reduce the long-term disability payout. If Veterans Affairs Disability Compensation is not explicitly listed, you may be able to receive those benefits without a long-term disability offset or demand for back pay.
Check your policy and double-check with the insurer to be sure your VA benefits won’t offset your long-term disability benefits. You can also reach out to our Alabama law firm if you have any questions about long-term disability offsets and your VA benefits. We thank you for your service, and want to remind you that claim reviews are free. Tom and his team are happy to help vets however we can.
How an Attorney Can Help with Long-Term Disability Offsets
If you’re dealing with any long-term disability offsets or any demands for back payment from your insurance company, you need to speak with a lawyer as soon as possible. An experienced attorney can help you by:
- Reviewing the Language of Your Policy: Your attorney can comb through the language of your insurance policy to identify any vague wording or outdated terms. There’s a chance that certain types of income sources may not be accounted for by offsets.
- Challenging the Insurer’s Offset Claims: The insurance company may be mistaken. Your lawyer can point out miscalculations, violations of state or federal laws, double-counted income, and the use of income projections to calculate offsets rather than your actual income.
- Pushing Back Against Unfair Overpayment Demands: When the insurance company’s overpayment demands are unfair, your lawyer can help negotiate a lower repayment and prevent payment of money you don’t actually owe.
- Negotiating a Better Offset Agreement: In addition to negotiating overpayment demands, your attorney may be able to reduce the monthly offsets on your long-term disability benefits.
A Lawyer Can Help with the Complexities of ERISA Claims
If your long-term disability benefits are provided through your employer, that means the policy is governed by ERISA. ERISA stands for the Employee Retirement Income Security Act. However, if you’ve ever had to deal with the frustrations of ERISA claims, you would agree with Alabama Judge William Acker, Jr. that ERISA also stands for “Everything Ridiculous Imagined Since Adam.”
These kinds of cases are complicated. You can’t just file a bad faith insurance claim. Instead, you have to go through the ERISA appeals process. If the appeal is unsuccessful, you then have to get your appeal reviewed by a federal judge under a very strict standard of law.
You must not go it alone if your disability benefits are subject to ERISA regulations. You need a lawyer who has worked on these kinds of claims and understands how to craft a compelling appeal. The team here at Sinclair Law Firm has helped many people in Birmingham and other parts of Alabama with ERISA and non-ERISA claims, and we’re more than ready to help you.
Why Choose Sinclair Law Firm for Your Long-Term Disability Case
There are many law firms in Alabama that can help you with long-term disability disputes, but Sinclair Law Firm stands apart thanks to our knowledge and reputation. Whether you owe the insurance company your lump sum SSDI payment or your disability coverage has been offset, Tom Sinclair is here for you with answers you can understand.
- Knowledge of How the Insurance Industry Operates: Tom started his legal career representing automakers and insurance companies. He had a change of heart and realized he wanted to help working Alabamians. Tom knows how companies think, and he can use that knowledge to your advantage.
- Insurance Companies Know Our Firm’s Reputation: We know how insurance companies operate, and vice versa. In fact, some insurers flag files when Tom’s name appears in them. Our firm seems to have a reputation for fighting for our clients and not backing down.
- We Represent Alabamians from All Walks of Life: We don’t care about your class or your politics. We just care about doing what’s right. If the system lets you down, Tom and his team feel like we need to make sure it works for everyone equally. We are up to the challenge.
- Free and Confidential Claim Reviews: We provide confidential claim reviews free of charge. We know insurance is confusing, and there’s a whole lot of fine print. Get help from a proven insurance lawyer here in Birmingham and find out what your best options are for securing those benefits.
- We Can Work with Your Financial Situation: You were likely counting on those long-term disability benefits, and we know that times are tough. Sinclair Law Firm will work with you and your financial situation to figure out a reasonable payment arrangement.
Get a Free Claim Review with an Experienced Alabama Insurance Attorney
If your insurance company is trying to take your SSDI or VA disability benefits, you need Tom and his team on your side. We can handle ERISA and non-ERISA claims, and we’re not afraid to stand up to big companies. For a free claim review with a proven Alabama insurance attorney, contact our Birmingham law firm today. You can also call Sinclair Law Firm at (877) 249-0091.