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Disability Insurance: Long Term: Group

Offsets

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7/19

As a general matter, group Long Term Disability Plans will not pay full benefits if other disability payments are being made. Such other payments are called "offsets" or simply "other income." They are subtracted from the amount of benefit otherwise payable. There is generally a minimum the plan will pay, no matter how large the offsets.

Other Income which is generally offset

The plan will list what it considers to be other income. Other income sources generally include:

  • State disability payments.
  • Social Security Disability Insurance (SSDI).
  • Disability payments from a pension or retirement plan.

For example: The plan pays 60% of salary. Your monthly gross income is $4,000 per month. You are entitled to an SSDI payment of $900 per month. While 60% of $4,000 is $2,400, the plan will subtract your SSDI payment of $900. While you will receive $2,400 (60% of your salary), but only $1,500 will come from the Long Term Disability plan ($2,400 - $900 = $1,500).

Income which will not be offset

Long Term Disability policies only offset income described in the policy.

No matter how much you earn from the following sources, they are generally not offset against the long term disability payments:

  • Interest on bonds or savings account.
  • Any income from investments.
  • Lump sum payments such as a viatical settlement or court judgment.
  • Capital Gains from stocks or sale of real property.
  • Gifts.
  • Payments by an individual disability income policy.

Minimum Monthly Benefit

There will almost always be a minimum benefit a Long Term Disability Policy will pay despite any other income you receive. It is usually either a flat amount such as $50 or a percentage such as: "10% of your normal benefit but no less than $100."


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