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This is a question I hear, or a fact pattern I see, all the time. An award of social security disability (or SSD) benefits ALWAYS has an impact on your LTD claim. Allow me to explain the two ways in which it can affect your claim:

At a very basic level, winning SSD benefits is a sort of verification of your status as disabled. It is another independent organization concluding that you are, in fact, disabled. This doesn’t mean your LTD claim is safe, or will never be rejected/denied. Insurers love to overlook SSD awards. But it IS proof that another entity felt the evidence indicated disability. Obviously, SSD and your insurer use different standards in judging disability. However, by operation of law in many cases, your insurer cannot arbitrarily disregard the fact that you have been awarded SSD benefits. This is a good thing.

On a financial level, it has serious implications for your LTD claim. The VAST MAJORITY of disability insurance policies have “offsetting income” provisions (or the like). These provisions state that income from certain other sources offsets what your insurer pays you. SSD income is ALWAYS specified. What happens is best explained by example. Say AETNA/Hartford/UNUM/etc are paying you $2,000.00/month BEFORE you get SSD. All of a sudden, you get a letter from SSD saying you have been awarded benefits in the amount of $1,000.00/month going back 6 months. They pay you $6,000.00 (for the past 6 months), and they say you will get a check monthly for $1,000.00.

Will social security benefits effect your long-term disability benefits?By the contract with your insurer, your insurer will now pay you $1,000.00/month ($2,000 - $1,000 = $1,000). This is good for many reasons. Most importantly, it diversifies your income and protects you in the event that one of your benefits is cut off. However, what about the fact that you were awarded “back-benefits” for the past 6 months?

You will owe that money back to your insurer. The award of back benefits means your insurer should have been paying you $1,000.00 less each month for the past 6 months. They will want that money back (when they realize it).

Which brings me to the advice: When you receive an award of SSD benefits, DON’T SPEND THAT CHECK!!! It is highly likely you will owe the majority of it, if not the entirety of it, back to your LTD insurer. Spend it, and the trouble starts.

Of course, in such a circumstance, speak with an attorney. Like I said, I see this issue all the time. I know how to negotiate a “repayment of overpayment” agreement that serves to help keep you on claim.

Ben Glass
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Ben Glass is a nationally recognized ERISA disability & life insurance attorney in Fairfax, VA.