If you become disabled due to an illness or injury, you may look to two different forms of benefits to support you financially while you are unable to work: long-term disability (LTD) insurance and Social Security disability insurance (SSDI). Each type of benefit has an important role to play for people with disabilities. Together, they can form a critical safety net that protects against financial ruin.
Yet the way that these two benefits interact can be confusing. Common questions that may arise include:
- When should I apply for SSDI and LTD benefits? Should I apply for one before the other?
- Can I only have one or the other?
- If I get SSDI, do I have to pay back the insurance company for any LTD benefits that I received?
The last question is the topic of this article. Because it can take a substantial amount of time to be approved for SSDI benefits, many people receive LTD payments well before they get a decision about Social Security. Read on to learn what your obligations are if you are approved for SSDI while on LTD benefits.
How Monthly Disability Benefits and Payments from Social Security Offset
It is possible to receive both SSDI — a government program funded by the Social Security Administration (SSA) — and LTD benefits from a private insurance company at the same time. Many individuals choose to prioritize disability insurance, as it is considered by some experts to be even more important than life insurance.
If you are unable to work due to a disability, you can apply for both SSDI benefits and disability benefits. There is a wait time for the LTD benefits to kick in (often 6 months, but will depend on your specific policy), after which you will start receiving payments (a portion of your paycheck) if your claim is approved. During this time, your SSDI application may still be pending.
Many LTD insurance policies have what is known as an “offset provision.” These provisions vary, but will generally (1) require policyholders to apply for SSDI benefits; (2) reduce the monthly benefit by the amount of the SSDI payment; and (3) require you to pay back the insurance company from any disability payout that you have received.
On a monthly basis, the way that this works is relatively simple. If you received $2,500 in LTD benefits and then were awarded $1,000 in SSDI payments, then your LTD benefits would be reduced to $1,500. You would still receive $2,500 a month, but only $1,500 would be from the insurance company, and the remaining $1,000 would be from the SSA.
Paying Back a Disability Payout
In many cases, individuals who are approved for SSDI will not be approved for a significant period of time after they initially apply. In addition to the time that it takes to be approved for SSDI benefits, there is also a 5 month waiting period before the SSA will start payments. This time period begins to run after the date that a person’s disability started.
After an individual is approved for SSDI benefits, he or she may be eligible for both monthly payments as well as past-due payments back to the date of their disability. This amount may be paid in installments or in a lump sum. A person who is also receiving LTD benefits will generally be expected to pay back the insurance company from this pay out from SSDI.
Using the example above, assume that you have been receiving $2,500 a month in LTD benefits for 10 months, and were just approved for SSDI payments in the amount of $1,000. You received a past-due lump sum payment in the amount of $10,000, which covers each month from the date of your initial disability (per the SSA) until the current month. You will be required to pay the insurance company the full $10,000 — $1,000 for each month of disability payments.
There are some parts of your SSDI benefits that your insurance company typically will give you credit for, and will therefore be deducted from your payback amount. This includes your attorney’s fee and any cost of living increases to your Social Security benefits. If your attorney’s fee was $2,500 in the example above — the standard 25% — then your payment would be $5,500 instead of $8,000.
Why Checking the Policy Is Vital
Of course, it is important to remember that every long-term disability insurance policy is different — and not every policy will contain an offset provision. In some cases, the policy will be drafted in such a way that the insurance company will not be able to recover your SSDI benefits. There may also be a defense to paying back the benefits. You may also be able to negotiate a partial rather than a full repayment, allowing you to keep some of your Social Security lump sum award.
Before you sign paperwork or agree to pay back a portion of your SSDI benefits, consult with an experienced Philadelphia disability benefits lawyer. Your attorney can review both your LTD claim and your SSDI claims, and can counsel you on your obligations with respect to your benefits if both are approved.
Work with a Philadelphia Disability Benefits Lawyer
The world of Social Security disability and long-term disability insurance benefits can be complex. If you are facing a health crisis and are unable to work as a result, the stress of handling these claims and the related paperwork can be overwhelming. A Philadelphia disability benefits lawyer can help.
Since 1985, Bross & Frankel has represented clients in both long-term disability and Social Security disability cases. We work throughout Pennsylvania and New Jersey, advocating on behalf of people with disabilities to help them get the benefits that they deserve. To schedule a free claim review, contact our office today at 856-795-8880, or reach out anytime online.
Rich Frankel is the managing partner of Bross & Frankel. He is a member of the New Jersey and Pennsylvania bars. He has focused exclusively on disability and social security benefits since 2005.
Mr. Frankel joined what is now Bross & Frankel after having watched his father struggle with disability, fighting a lengthy illness. Mr. Frankel founded the firm’s veteran’s law practice and substantially grew the social security disability practice, focusing Bross & Frankel’s ability to fight for all of the disability benefits available to his clients.
Mr. Frankel additionally fights for clients in court, obtaining frequent victories in Social Security appeals and against insurance companies in Federal court.