You’re finally receiving the long-term disability (LTD) benefits you deserve. After months or even years of medical appointments, paperwork, and waiting, the insurance company has started paying out. It should be a moment of relief.
But for many claimants, this isn’t the end of the road. In some cases, insurers may demand that you pay back part of the benefits you’ve received. These overpayment demands can be financially and emotionally overwhelming, especially if you weren’t expecting to have to return any money.
Our long-term disability attorneys at Bryant Legal Group have guided many clients through these situations. Whether it’s a return to work, receipt of Social Security Disability Insurance (SSDI), or another change in benefits, understanding your legal obligations is critical.
In this article, we’ll explain when you may have to pay back long-term disability benefits. We’ll also discus the potential consequences of failing to do so and how you can protect yourself with help from an experienced legal team.
Why Would an LTD Insurer Demand Repayment?
Repayment demands, also called overpayment claims, typically occur when your insurer believes you’ve received more money than you’re entitled to under the terms of your policy. These situations are more common than you might think and don’t always result from errors on your part.
Here are common scenarios that can trigger LTD overpayment demands:
1. You Received SSDI Benefits or Other Disability Payments
Many long-term disability policies include offset provisions, which allow the insurer to reduce your benefit amount if you receive or are entitled to other forms of income-replacement benefits, such as:
- Social Security Disability Insurance
- Workers’ compensation
- VA disability benefits
- Personal injury settlements or judgments
For example, if you receive $6,000 per month in LTD benefits and later are approved for $2,500 per month in SSDI, your insurer might reduce your monthly LTD payment to $3,500. If the Social Security Administration grants you a lump-sum backpay award (covering the time between your SSDI application and approval), the insurer will typically demand reimbursement of that same amount.
Tip: If your LTD insurance company advised or encouraged you to apply for SSDI, they are not being generous. They’re protecting their bottom line by reducing your monthly payment and recouping past overpayments. Make sure you are aware of and can account for all the potential effects of applying.
2. You Returned to Work Without Notifying the Insurer
If you begin working in any capacity—full-time, part-time, or even freelance—you are typically required to notify your disability insurance carrier. Depending on your policy, your earnings may reduce your monthly LTD benefits or disqualify you altogether.
If the insurer finds out after the fact that you’ve been earning income while collecting full disability benefits, they may demand repayment for the overpaid period. Even minor or short-term employment can trigger this.
Tip: Some policies offer “return-to-work” incentives or allow part-time work under residual disability provisions. But you must stay in communication with your provider about changes to your work. Failing to report employment may lead to serious consequences.
3. Your Personal Injury Settlement Includes Lost Income
If your disability stems from an accident or injury caused by a third party, you may have received a personal injury settlement. An offset to your LTD depends on the specific offset provisions in your LTD policy.
For example, if the settlement includes compensation for lost wages, your LTD insurer may claim the right to recover a portion of the benefits they paid you during that period. Other policies may offset based on the total settlement.
The insurer will closely examine the settlement documentation to determine what portion—none, some, or all—relates to the insurer’s offset provisions. It’s important to structure your settlement carefully and seek legal advice to avoid unnecessary repayment obligations.
Tip: Before you sign any release or settlement agreement, it’s always a good idea to have an experienced disability attorney review the terms and exact language of your policy. They can alert you of any concerns and potentially negotiate more favorable terms on your behalf.
What Happens If You Don’t Pay Back Long-Term Disability Benefits You Are Required to Return?
Failing to repay your LTD insurer can have serious legal and financial consequences. Many claimants mistakenly believe that, since they didn’t cause the overpayment or already used the funds, they won’t have to pay the money back. Unfortunately, that’s rarely the case.
Here’s what may happen if you ignore or contest an overpayment demand:
1. Your Monthly Benefits May Be Withheld or Reduced
Most insurers reserve the right to reduce or withhold your ongoing benefits to recover overpayments. Some will deduct the full amount from future payments until the debt is satisfied. Others will offer installment plans.
2. Your Insurer May Send You to Collections
If your benefits have already ended or there aren’t enough payments left to cover the debt, your insurer may refer your case to a collections agency. This can damage your credit and lead to aggressive collection tactics.
3. You May Face a Lawsuit
In some cases, insurers will file a civil lawsuit to recover the overpayment. This can result in wage garnishment, liens, or judgments that follow you for years.
Even if you believe any repayment request is unfair, you should not ignore it. Work with an experienced attorney to evaluate the claim, protect your rights, and negotiate a resolution.
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How to Minimize the Risk of LTD Overpayment
While not all overpayments are avoidable, there are important steps you can take to protect yourself from costly mistakes:
1. Understand Your Policy’s Terms
Review your LTD policy carefully. Pay special attention to:
- Definitions of disability
- Offset provisions
- Reporting obligations
- Return-to-work rules
- Income limitations
If you’re unsure how these apply to your situation, consult a disability insurance attorney for a personalized explanation.
2. Keep the Insurer Informed
Transparency is key. Report changes in your medical condition, work activity, income, and receipt of other benefits as soon as they occur. This minimizes the risk of accidental overpayment and shows good faith on your part.
3. Track All Correspondence and Payments
Maintain detailed records of every communication with your insurer and any payments you receive. If there’s ever a dispute, your documentation can help support your position and clarify any misunderstandings.
4. Coordinate Carefully with Social Security and Personal Injury Attorneys
If you are applying for SSDI or pursuing a personal injury case, make sure all professionals involved are aware of your LTD benefits and the potential for offsets. An experienced attorney can help structure settlements and manage claims to minimize repayment exposure.
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What to Do If You Receive an Overpayment Demand
Don’t panic if you’ve already received a repayment request from your insurer. But don’t ignore it, either. Instead, take these steps:
- Contact a disability insurance attorney immediately. Time is critical. The sooner you get legal help, the more options you’ll have.
- Review the overpayment notice carefully. Look at how the insurer calculated the overpayment. Are there errors in dates, benefit amounts, or offset figures?
- Gather supporting documentation. Collect medical records, payment stubs, correspondence, and any other relevant evidence to support your position.
- Negotiate or appeal if necessary. In some cases, overpayment demands can be reduced, waived, or appealed. This is even more likely if they stem from administrative errors or unreasonable assumptions.
Bryant Legal Group Can Help You Protect Your Disability Benefits
At Bryant Legal Group, we’ve built our practice around helping professionals and claimants protect their long-term disability benefits. We understand the stress and uncertainty that overpayment demands create and are here to help you resolve them confidently and strategically.
If you have to pay back long-term disability benefits or are experiencing any other issues, our attorneys are ready to review your case, explain your rights, and advocate on your behalf.
You don’t have to face the insurance company alone. Schedule a free consultation with Bryant Legal Group today. Call 312-634-6415 or fill out our online form to get started.
The content provided here is for informational purposes only and should not be construed as legal advice on any subject.