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Disability offsets: What you need to know

Disability insurance can be complicated. Not only must you navigate a complex world of regulations and red tape, but you must do so while living with a disability. Even if you have lots of experience with disability insurance, you may still find many aspects of it confusing.

One concept that may throw you for a loop is disability offsets. Many insurance policies contain these provisions—but many policyholders do not understand them.

What are disability offsets?

Offsets are provisions in an insurance policy that allow your insurance company to deduct your other sources of income from the monthly sum that you receive. Some examples of offsets include:

  • Social Security disability benefits
  • Workers’ compensation benefits
  • Benefits from other state programs
  • Employer-provided retirement benefits
  • Third-party settlements

You can determine whether your insurance policy contains offsets by reading through the long-term disability plan or the summary plan description sections.

Why does my insurance company offset my benefits?

Insurance companies take offsets because, in some cases, a client’s various disability benefits might total more than they would make by working. Offset policies allow insurance companies to pay much less than their full financial obligation to clients because the insurer can shift the financial burden to other parties.

While this is a boon to insurance companies’ pocketbooks, it is frustrating to policyholders who feel that their insurer is using a loophole to avoid paying the full amount owed to them. You may feel frustrated that your insurer is docking other income from your benefits.

What can I do about my disability offsets?

As someone who has a disability, you need to receive the maximum amount of benefits available to you. Unfortunately, there is little you can do to get rid of the offsets in your policy. However, there are other options available to you. To reduce offsets and receive a higher benefit amount, you can attempt to:

  • Negotiate with your insurer
  • Consult a disability insurance attorney
  • Cancel your policy and switch to one with different offset provisions

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