Disability insurance offsets and other sources of income that could affect your disability coverage

If you are considering purchasing disability coverage or if you have it already, it is important to understand how your benefits could be affected by other sources of income.


Offsets: what are they?

Offsets are reductions in your disability benefit amount that are applied if you are eligible to receive other sources of income. Offsets help ensure that employees who are on claim don’t get paid more while on disability than they do on the job. Check your plan details to see which offsets may reduce your disability benefit amount.  

Three common disability insurance offsets

Below are common disability insurance offsets that can impact your total benefit amount:

  • Workers’ compensation: Workers are eligible for this coverage the day they become employed. Benefits are paid if an employee suffers an injury or illness on the job and are meant to help replace lost income or cover medical expenses.
  • Social Security disability benefits: These are paid when an employee is unable to work due to a long-term injury that occurred on or off the job. In order to be eligible to receive these benefits, employees must be working for a significant amount of time.
  • State disability benefits: States including California, Hawaii, New Jersey, New York, and Rhode Island require employers to provide temporary disability insurance for employees who are out of work due to a covered short-term disability, such as maternity leave, a back injury, or surgery.

Other sources of income

If you are working part-time and are receiving benefits—usually called partial disability benefits—or are earning pension benefits, your disability coverage amount could be affected. Other sources of income that are not considered offsets are 401(k) plans, individual retirement accounts, severance packages, and stock options.

Each policy is different, so be sure to read your plan description to understand exactly what impacts your disability coverage.

Additional Reading

U.S. Social Security Administration Office of Policy, “Workers Compensation, Social Security Disability Insurance, and the Offset: A Fact Sheet,” accessed August 15, 2014, http://www.ssa.gov/policy/docs/ssb/v65n4/v65n4p3.html

SLPC 26063 08/14 (exp. 08/16)

© 2015 Sun Life Assurance Company of Canada. All rights reserved. For policy and underwriting company information, see the disclosures page.