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Insurance policies are known for being complex and difficult to understand - this certainly holds true with disability insurance
At Hollowtree, we strive to change this.
In this article, we dive into the concept of 'Offsets' in disability insurance and its effects on monthly disability benefits.
Defining Offsets
In the context of disability insurance, 'offsets' refer to the reduction of the Monthly Disability Benefit when or if the claimant receives other sources of income due to the disability.
For instance, if an individual claiming disability benefits receives income from Social Security Disability (SSDI), the monthly benefit from the insurance company would be reduced accordingly.
5 Types of Offsets
Below are Offsets that are commonly seen in Long Term Disability Insurance policies.
- Social Security Disability (SSDI) benefits
- Workers Compensation
- Settlement for ‘loss of time’
- Retirement Income
- Other Group LTD
Income not included as Offsets
It's important to note: Passive income from investments such as dividends or rent is not included in the calculation of offsets.
Spotlight: SSDI Offsets
SSDI benefits are one of the most common types of offsets…
Let's assume an individual receives a monthly disability benefit of $2000 from the insurance company. If the individual begins to receive $800 per month as SSDI benefits, the insurance company will reduce its monthly benefit by $800, making the new monthly benefit $1200.
Conclusion
Understanding the concept of Offsets is crucial when assessing a disability insurance policy. It helps to know how additional income could potentially reduce your monthly benefit and plan your finances accordingly.
While insurance policies can be nuanced and require careful reading, a comprehensive understanding of their provisions ensures they serve their purpose effectively. So, stay tuned for more articles breaking down the complexities of insurance policies, and remember, knowledge is power!
Written by
Georgetown. Former Wall Street. Now disability insurance expert for Physicians.
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