You and your loved ones may go through a difficult time when you are diagnosed with a disability. What if you have a long-term disability (“LTD”) claim through a private insurer? These private policies can replace some of your monthly income, but the private insurer typically has specific rules about Social Security benefits.
If your LTD claim is accepted, benefits are typically paid to you monthly; however, there are some circumstances in which the disability insurer can ask for their money back for other disability payments you have received. The private insurer will typically call this an “overpayment.”
Next, we’ll go over some of the most common overpayments.
What Types of Situations Can Create LTD Overpayments?
The disability insurance can ask for their money back in the following cases:
Social Security Disability Benefits (SSDI)
Social Security Disability Income (SSDI) benefits are the most common cause of an overpayment due to the LTD insurance carrier. The long-term disability insurer can typically reduce your monthly LTD benefit dollar-for-dollar by the amount of your monthly SSDI benefit.
This is most common in group policies obtained through your employer. Generally speaking, the application procedure for SSDI compensation is longer than the application procedure for LTD benefits.
Furthermore, if your SSDI claim is rejected on the application asking for a hearing and contesting the rejection may cause a further delay in the payment of SSDI benefits. As a result, you could receive your full long-term disability payment for months or even years before you receive an SSDI award.
If your SSDI application is approved, the approval will be back-dated. Your LTD insurance carrier will consider any months in which you received SSDI back-pay at the same time you received LTD benefits as “overpaid.”
It is crucial to inform your LTD insurer as soon as your SSDI claim is approved so the LTD insurer can calculate any overpayment that may be due on your claim.
Typically the overwhelming majority of SSDI back-pay will be owed to the LTD insurer. You should avoid spending your SSDI backpay until you have confirmation of how much the LTD carrier will bill for an overpayment. If you do not, the LTD insurer can treat the overpayment like any other debt and send it to collections or harm your credit.
Personal Injury Settlements
Suppose your disability was brought on by a car accident, a slip-and-fall incident, or another type of personal injury claim, and you finally received a third-party settlement. This is another scenario where you can be required to pay money to your long-term disability insurer.
This kind of offset, comparable to SSDI benefits, is frequently found in group policies, though the policy language can vary. An experienced attorney can review your policy to help determine whether a personal injury settlement will result in an overpayment bill from your LTD carrier.
Once again, it is crucial to notify your insurance provider as soon as you get a third-party settlement so they can quickly determine any overpayment you might have to repay.
If at all possible, wait to spend the money from your settlement until you know how much you will have to reimburse the insurer so that you can avoid negative consequences from their bill.
Will I Have to Repay My Earnings From Work?
And finally, it is sometimes possible to continue receiving long-term disability benefits while working. Your wages will likely be deducted from your long-term disability benefits if you resume working full- or part-time and continue to fulfill the LTD policy’s definition of total or partial disability.
Typically, you are required to notify the insurance provider immediately if you return to work. But, if there was a delay in alerting the insurer or if the insurer kept paying you your full benefit without considering your work earnings, you would need to pay the insurance company back for the income you earned.
Policy language varies for this type of offset. There may be a formula to calculate the overpayment, or it may be a simple dollar-for-dollar offset. It is crucial to evaluate your policy to make sure that your insurer is accurately computing the offset for any wages you receive. In addition, it is crucial to contact your insurance provider right away if you start working again because failing to do so could result in you owing a bigger overpayment.
What Happens If I Do Not Pay the Overpayment Back to My Long-Term Disability Carrier?
If you get long-term disability benefits, you can get a notice saying that your insurance company unintentionally paid you more than was due. You can be required to repay surplus money to your insurance provider in these circumstances.
Several problems could occur if you don’t return the calculated overpayment, including:
● Your disability benefit may be reduced or zeroed out until the total is paid.
● Even if you are still unable to work, your benefits could be denied.
● You can be sued by your insurance company or collections agencies for the balance owed.
How to Plan for Offsets and Overpayments In your Long-Term Disability Policy
Read the Policy’s Terms and Conditions
You must carefully read and understand the details of your policy. Knowing what you can anticipate from your insurer and what your insurer expects of you can help you avoid problems down the road because every insurer and every policy varies.
Keep Correct Records and Documentation
You can stay one step ahead of your insurer by keeping updated and having the necessary paperwork for payments as well as other important notices. Keep all relevant records that relate to your claim.
Keep in Touch with the Insurance Provider
Keeping records is only sometimes sufficient; going one step further and communicating necessary details with your insurer can be advantageous. Sharing information about your work schedule, resolving payment issues, and promptly claiming other benefits are all ways to maintain good relations with your insurance provider.
Conclusion
So, can disability insurance ask for their money back? Yes, there are a number of circumstances where a long-term disability insurer can offset benefits and claim an “overpayment” on your claim. It is important that you prepare for these circumstances to avoid a surprise bill in the future from your insurer.
