My LTD works the same way, the insurance carrier offsets (deducts) any funds paid by social security disability regardless of whom the recipient is.
Sadly, when dealing with employer provided LTD group coverage, it's quite standard these days.
Even though the children's benefits are to be used for the support of the children, they still count it as total family income and reduce what they pay.

When your children reach the age of no longer being eligible to collect SSD benefits off your record, your LTD carrier would then be responsible to increase the amount that they had previously offsetting.