How Will Prospective Offsets Affect Your Long-term Disability Insurance Claim?At BenGlassLaw, our long-term disability lawyers often receive and respond to calls, emails, and online posts about “prospective offsets” by disability insurance companies. Here is one question we saw on a message board about this issue:

“The insurance carrier for my work said that the agreement with my company allows them to deduct the maximum that could be paid by the state if I qualify for the state disability. Is this allowed?”

The reason I am asking is because mine was offsett pending ssdi and now have been denied ssdi. So why did they offset so much money if they aren't entitled to it unless I received both LTD and SSDI? Now I am out all my money and there must be something I can do. How was I supposed to know? You would of thought that the insurance company would have know this. Isn't this illegal? I worked for a hospital and my policy was a good one. If the law states they can't offset your pending ssdi unless i have been overpaid or collected both. Like someone here said how would they know to offset if my pia benefits were not printed? Whose fault is this?”

Both of these questions are about the same thing. Newer policies are including provisions which say, basically, that the insurer can "prospectively offset for benefits you are eligible to receive" irrespective of whether or not you receive them, unless you actively pursue them. In plain English this means if you don’t apply for, and actively pursue, SSDI benefits, your insurer can reduce payments to you by an amount it anticipates you would receive from SSDI. In other words, they act like you are getting it when you arent, just because you didn't comply with the terms of their contract.

At first, insurers were happy to simply offset your benefits by the amounts paid to claimants by SSDI. Claimants then stopped applying for SSDI. Then, insurers began requiring claimants to apply. The problem with that was that not all claimants get approved, and many gave up after being denied. After a time, they realized they could legally write in contract clauses that allowed them to prospectively offset if you failed to actively apply for such benefits.

That is where we are today. If your policy contains this language, and you don’t know about it, you may soon get a HUGE BILL FOR THOUSANDS OF DOLLARS. Here is what you have to do:

Get your disability insurance policy. Check the index and look for a section on “offsets” or “how payments are calculated.” Go to that section, and look for a section that allows your insurer to “prospectively offset” for other disability income benefits. If they are allowed to, you have a legal obligation under that contract (your policy is technically a contract) to apply for, and actively pursue such benefits. Failure to do so will entitle your insurer to reduce their payments to you.

I told the two inquisitive minds above to check their policies for that language. If the language is in there, they are in trouble. Legally, the insurers can do this, and there is no remedy. The burden is on the claimant to know what is in the policy. The take away is that you need to know your policy. Look through it for “prospective offsetting” provisions. If they are there, you need to actively pursue those benefits to collect a full check.