For most disabled persons who eventually apply for and are awarded Social Security Disability Benefits, harsh reality sets in when they get a letter from the insurance company stating that their disability claim “has been overpaid” and that they now owe “x” amount of dollars, payable to the insurance company in one lump sum.  Sometimes this amount can be thousands of dollars!  However, by the time the disabled individual receives this letter from the insurance company, he or she has already spent this money to pay medical bills, pay for medications, and simply survive.  He or she no longer has the funds necessary to repay this amount due. 

The truth of the matter is that most private insurance policies contain a provision specifying Social Security Disability Benefits as a deductible source of income.  For example, if the insurance company was previously paying you $1,500 per month in disability benefits, and Social Security subsequently begins paying you $1,000 per month in SSDI, by contract, the insurance company can legally reduce its monthly disability payment to you down to $500 per month.