Should You Accept an LTD Lump Sum Settlement?
If you are receiving LTD payments, you may be eligible for a lump sum settlement that can help you financially or simply relieve you of ongoing LTD requirements. Whether your insurance company has approached you or not, you may be eligible for settlement. But is an LTD lump sum settlement right for you?
What Is an LTD Lump Sum Settlement?
A long-term disability lump sum settlement or buyout occurs when the insurance company make one large payment to you that settles any future claims against the policy. In exchange for that payment, you release the company from future liability for the current claim. If you accept a lump sum settlement, the insurance policy terminates and the company will not continue to make payments to you. If your condition worsens and you are out of work for longer than expected, the company won't be liable for any extended amount of time after the buyout.
Many insurance companies settle LTD claims because they do not want to pay benefits for a long or unknown period of time. However, some insurance companies don't offer lump sum settlements. Each company has a different policy and procedure for offering settlements.
Is a Lump Sum Settlement Right for You?
There are many reasons that people opt for a lump sum settlement. You:
- No longer have to worry about the insurance company determining you are not disabled and stopping benefits.
- Don’t have to worry about the insurance company filing bankruptcy and closing down.
- No longer have to prove you are disabled to the insurance company.
- Can use the large lump sum payment of money as you desire.
When the Insurance Company May Offer You a Settlement
An LTD insurance company will not offer you a settlement because it’s best for you — it's best for them. They will agree to a lump sum buyout if they think they can save money in the long run instead of continuing to pay you monthly LTD payments.
The company may be more likely to offer you a settlement if your condition is chronic but not terminal. If your condition is terminal, they may know there is an end to payments in sight, so they won’t benefit from a lump sum payment.
If you apply for SSD, the insurance company will likely wait until your SSD claim is approved to offer you a settlement. This way they can offset the amount you are offered by your SSD benefits.
If an LTD company thinks they will be able to deny your benefits or terminate them soon in the future, they are not likely to offer you a settlement option either.
Understanding the Amount of Your LTD Lump Sum Settlement
A lump sum settlement offer is made to be attractive and rush you into making a decision. But don't hastily accept an offer that does not address all of your needs. You deserve an amount that will fully take into account the extended period of time that your condition will cause you to be unable to work. Make sure that you consider any expectations of your inability to work when reviewing a settlement offer.
If your condition is expected to last indefinitely or result in death, you should expect a higher settlement offer than if the doctor has given your condition a limited amount of time. However, if you have been approved for SSD or workers’ comp, those amounts will likely offset your settlement offer as well.
Remember that if you take an LTD insurance buyout, their responsibility in paying you will end, even if your disability continues. You should consider what you need the money for, and how a lump sum can help you financially now and in the future.
How Are Settlement Offers Calculated?
Every company has a different method to determine exactly how much they will offer to an LTD claimant. However, they typically look at mortality rates and morbidity rates, which consider how long you will live and whether you will reach the max benefit period.
Other considerations by the LTD insurance company when calculating a buyout include:
- Your age
- Reserves set aside by the insurance company to cover your policy
- Value of potential future monthly disability income benefits that are owed to you
The insurance company will come up with a “present value” amount that they will offer in settlement. This is likely not their final offer. A skilled attorney can help you negotiate with the insurance company to obtain the best offer possible.
Speak to an Ocala FL LTD Attorney
To learn more about whether or not taking an LTD lump sum settlement offer makes sense for you, contact CJ Henry Law Firm PLLC today.