Disability insurance: What does offset mean?

When a person purchases disability insurance or receives coverage through an employer, he or she hopes that any claim will be taken care of in an efficient manner. Waiting to receive benefits is never an easy situation to go through.

Typically, a disability policy will pay in one of two ways: a percent of the money you were earning before becoming disabled or a set amount every month.

In the event that your policy pays a percentage of your prior earnings, the insurance company will likely “offset” from your benefits any money your receive from other sources, such as Social Security Disability Insurance, state disability insurance, workers’ compensation or Public Employee Retirement System benefits.

The reason for this is that the coverage is only insuring that you will receive the equivalent of your pre-disability earnings from all sources. This allows the disability insurance provider to pay less money in the event that you are receiving payments from other sources.

To help save money, insurance companies will follow-up with other income sources to ensure that you have applied for and are receiving everything you qualify for.

Some people find that their insurer is reducing benefits due to offsets. When this happens, it is essential to review your policy, making sure that this is allowed. Furthermore, you should confirm if the amount they are subtracting is correct.

Insurance companies have no problem selling policies, but are not nearly as friendly when it comes to paying a claim. Those who believe they are getting the bad end of a deal due to offsets should take the appropriate steps to ensure they are receiving the compensation they deserve.