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If your long term disability (LTD) insurer has written to say you owe them money, you are understandably anxious. These letters are often abrupt, complex, and intimidating. Many people assume they must pay immediately, without question. That is simply not true.
As a lawyer who regularly advises clients facing LTD overpayment demands, I can tell you this firmly: you have rights, you have options, and you should never pay anything until you understand exactly what the insurer is claiming and why.
Below, I’ll break down the typical reasons insurers make these demands, explain what steps you should take right away, and clarify the situations in which repayment may not be required at all.
The typical demand letter alleges that an “overpayment” has occurred and threatens to terminate benefits unless you arrange to repay your insurance company. Insurers typically allege an overpayment for one (or more) of the following reasons. Understanding which applies to you is the first step in assessing the legitimacy of the claim.
This is the most common scenario. Many LTD policies allow the insurer to deduct “other income” from LTD benefits, such as:
Most disability insurance policies have offset provisions that reduce payments when recipients receive benefits from other sources, such as CPP benefits.
If you receive a retroactive lump sum, your insurer may claim they “overpaid” you during the overlapping period and demand reimbursement. That does not mean their numbers—or their interpretation—are correct.
You may be required to repay long term disability benefits if you receive benefits from both an insurance provider and the Canada Pension Plan (CPP) if your policy has a provision providing an offset or benefit integration with CPP-D. If you receive both LTD and CPP-D benefits, the insurance company is entitled to reduce its benefit by the amount paid by CPP-D. If you received unreduced (full) long term disability payments for a period and then received CPP-D retroactively for the same period, the insurance company will be demand the overpayment.
Sometimes, after months or years of paying benefits, the insurer may terminate your long term disability claim if they determine you are no longer disabled according to their criteria. If the decision is made at the time of definition change from own occupation to any occupation under the policy, it is unlikely that any alleged overpayment will be alleged. Sometimes an insurer will pay disability benefits past the definition change date on a “without prejudice” basis because they require more information to make their decision. If the insurer determines that you do not satisfy the higher any occupation definition of disability, they should not demand repayment of any long term disability payments which were paid past definition change.
More rarely, an insurance provider may assert there wasn’t enough medical evidence of your medical condition, or that you did not qualify because you could have worked. It’s important to remember that you provided documentation of your medical condition and the insurance company determined that you satisfied the definition of disability. It is unlikely that a court would allow a retroactive determination that you should never have received those benefits and are required to repay your insurance company. These cases require careful legal review: policies rarely allow insurers to claw back all benefits paid unless specific conditions are met.
Insurers make mistakes. Common errors include miscalculating your monthly benefit, using incorrect dates, misapplying offsets, or misunderstanding your income. Never accept an overpayment figure without a detailed, itemized breakdown.
This is a more serious category that is increasingly common. The insurer may allege you worked, earned income, volunteered, or misreported information while receiving LTD. They may use heavy language—“misrepresentation,” “fraud,” “failure to disclose.”
Key points:
Common insurer misunderstandings:
What to do: Request all evidence (surveillance, employer records, tax data, case notes), the exact policy provisions they rely on, and avoid informal explanations that can be misconstrued. Insurers often overreach; the burden of proof remains on them.
Insurers sometimes argue you breached the policy by failing to follow treatment, attend rehabilitation, or cooperate with assessments—and then use that to justify repayment.
Disability insurance policies typically require you to:
Important qualifiers:
Common misinterpretations by insurers:
When can they reclaim paid benefits? Rarely. To justify repayment, they would need to show the policy clearly required the specific treatment/rehab; the plan was medically reasonable; your provider agreed; and your non‑participation materially affected eligibility. Most files do not meet this threshold.
How to respond: Request (in writing) the exact policy provisions, all medical/rehab records relied upon, and copies of any plans or provider notes. Then seek legal advice before you respond substantively—insurers often use non‑compliance allegations as a pretext to terminate or pressure you.
An LTD insurer cannot demand repayment simply because they want to. They must identify a specific clause in your policy that:
If the policy language is vague, inconsistent, or silent, the law generally interprets it in favour of the insured, not the insurer.
Ambiguity works against the insurer.
Demand letters are designed to prompt quick action. You are not required to pay immediately, accept their numbers, or agree to their proposed repayment schedule. You have the right to seek information, dispute the claim, and obtain legal advice first.
If you are facing an overpayment issue, it’s best to consult an experienced disability lawyer who can analyze your policy and the overpayment demand.
Ask for:
Many overpayments shrink—or disappear—once the insurer is required to prove its math.
Your policy is the contract that governs everything. Review sections titled “Other Income Benefits,” “Offsets,” “Integration of Benefits,” “Overpayments,” “Recovery of Funds,” and “Rehabilitation.” Key questions:
Ambiguities are typically interpreted in favour of the insured.
Misaligned dates can invalidate an overpayment claim. Confirm:
CPP‑D covering a period before your LTD claim should not be offset against LTD benefits.
Insurers often threaten to deduct your entire monthly LTD payment until the overpayment is “recovered.” You can negotiate:
Never agree to a 100% reduction of your LTD benefits to repay an overpayment without legal advice.
Legal advice is especially important if:
Consulting with a long term disability lawyer can help you navigate the process of contesting a termination of benefits. You should consult with a long term disability lawyer immediately if your benefits are cut off, as they can help level the playing field against the insurance company.
A disability lawyer can review the policy, spot errors quickly, challenge invalid offsets, safeguard your ongoing benefits, and negotiate reductions or waivers. If you’re navigating this situation, you’re not alone—and you don’t have to figure it out without guidance. Contact Burn Tucker Lachaîne today by texting at 613-777-0992, calling at 613-777-3301 or visiting our website. We will offer a free consultation and can discuss your options.
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