Disability insurance lump sum settlements and buy outs

Has your disability insurance company contacted you about taking a one-time lump-sum settlement to buy out your disability insurance claim? We’ve prepared this section of our website to give you some of the information you need about lump sum disability settlements. We hope it will offer some sense of the process, although it is often different among insurers.

You are also invited to call us at 877-583-2524 and learn how we can help. This is too important a decision to make without the help of experienced disability counsel.

What Is A Lump Sum Settlement or Buyout For A Long-Term Disability Insurance Claim?

A buyout, or a negotiated settlement, is what happens when the disability insurance company and the claimant settle on a one-time payment for a reduced total value of the long term disability insurance policy. The claimant can no longer make any claims for benefits, and the insurance company will no longer honor the disability policy that was purchased, whether it was a private policy for a group or ERISA disability policy. No further benefits will be paid beyond the lump sum.

Clients Choose Us Because We:

  • Have recovered $200M+ for our clients.
  • Have seen your situation before.
  • Are aggressive in our approach.
  • Know the tactics used by the insurance companies.
  • Hold high AV Ratings & received the Super Lawyers designation each year.

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How Does A Lump Sum Disability Insurance Settlement Or Buyout Work?

Not all long-term disability insurance companies will consider or pursue a buyout of a claim. The important thing to understand: the insurance company has teams of economists and number crunchers who determine the current and future value of the policy. They are able to do these calculations, based on a great deal of actuarial data. They know precisely what it will cost the insurance company to continue to pay monthly disability benefits, and what they would like to pay you in a one-time buyout.

We have you protected - Read A Recent Success Story

You're in Good Hands - We've Done This Before

We recently resolved a matter with a major disability insurance company, through its third-party vendor managing the claim, whereby our client will continue to get paid for his lifetime, at a reduced monthly benefit, to resolve the disputed claim and ensure the viability of his benefits going forward.

While our client made a decision to sacrifice a small portion of his ongoing monthly benefit, which we had fought hard to continue during our efforts at resolution and efforts to mitigate the challenges presented by the claim, his comfort was taken in knowing that he will now live free from the ongoing harassment from the insurer, in an effort to impact his treating relationship with his medical provider, and to make determinations as to whether he was undertaking the appropriate care and treatment under the policy to qualify for continued benefits.

In reaching this determination, the client was able to cease medical requirements that provided no benefits, were costly and ineffective, and which caused harm due to the necessity of travel. The client feels relieved to no longer be wondering on a month to month basis whether his claim was being challenged, or terminated. Our role in advocating on his behalf helped move the case from being on the verge of a claim termination challenge to one that is now without need for further involvement.

Read more of what our clients have to say.

Here are some of the factors that long term disability insurance companies consider when calculating what kind of lump sum buyout to offer:

  • The disability policyowner's age
  • The monthly disability benefit.
  • The disability policyowner's overall health and life expectancy.
  • How severe is the policyowner's disability and is it possible they would recover?
  • What kind of residual benefits does the disability policy provide?

How Do I Know if the Disability Insurance Company is Giving Me a Fair Deal?

The only way to know if the disability insurance company is offering you a reasonably fair deal for your lump sum buyout is to understand the full value of your policy. This is different for every long term disability claimant, since every situation is different. Here is a small snapshot of the type of information we consider when negotiating a lump sum buyout with the long term disability insurance company:

  • What is the present value of your policy? What is the full value in today’s dollars?
  • What is the future dollar value of your policy, if benefits were to be paid out 100% under the terms of the policy?
  • What other factors will impact upon the valuation of the claim for settlement?
  • What factors might drive a claimant toward ending the monthly claim process?

Claimants need to understand their current and future costs of living before entering into a policy buyout discussion. Here's some of the information you need to consider:

  • What amount of money do you need to live on while you are unable to work?
  • If you were still able to work, what would your income be - including benefits, like retirement fund matching, health care costs, and any other income.
  • What kind of medical costs do you have now, and what do you expect those costs to be in the future?
  • If you are the chief breadwinner, would you be able to manage a lump sum so it would last long enough for your family's lifestyle?

Can I Negotiate My Own Disability Insurance Buyout?

Unless you are accustomed to negotiating important financial deals, chances are you will be easily outgunned by the insurance company representatives. Backed by a small army of professionals, the insurance company is going to do whatever it can to keep any lump sum payment as low as possible.

The first offer for any buyout will often be much lower than the value of your policy. The LTD insurance company relies on the temptation of what seems like a large number to a claimant to entice them to accept a low offer. It is far better for the claimant and the family to be represented by a disability insurance attorney with experience negotiating with insurance companies who can draw on decades of knowledge of negotiating buyouts to get to a successful lump sum settlement

Every tax situation is unique, but the one thing they all have in common is that no one wants to pay taxes if they don't have to. Our attorneys will work with you and your financial advisors to determine whether or not you have a tax liability in the year that you might be receiving a lump sum buyout. This is an important part of the negotiation process: understanding all of the liabilities that are a part of the settlement process.

If benefits were taxable when paid, they will typically be taxable.

Is a Disability Insurance Lump Sum Settlement a Good Deal?

The insurance companies use the attractiveness of the lump sum and the appeal of not having to worry about investigators, paperwork and requests for medical exams that never end to move claimants to settling cases quickly and with a minimum of negotiations. Our experienced attorneys understand how these companies take advantage of claimants' emotional response to the possibility of not having to worry about their benefits. We are able to negotiate on behalf of our clients by taking a rational approach to lump sum buyouts.

If you are able to invest your lump sum payment wisely and well, it can be a benefit to you and your family. The peace of mind that comes from no longer having to fight with the insurance company, go to medical examinations and ask your doctor to submit reports and paperwork can be a great relief. If you are unable to work, being free of the worry of surveillance and investigations can also be extremely liberating. No field representatives calling for updates, and If your disability might be resolved and you hope to return to work in some capacity, you do not have to worry about being restricted to maintain disability benefits.

A Recent Success Story

At the request of our client, a disabled chiropractor who was at the time 50 years old, we resolved his lifetime claim with a major disability insurance company. Through this favorable resolution, our client will continue to get paid his full monthly disability until the age of 70 with no proof of loss requirement, other than proof of life (an annual claimant form stating he is not working as a chiropractor), and a generous lump sum payment at the time he executed the Agreement to compensate for benefits payable after age 70. With this settlement our client did not reduce or compromise any of his benefits for the next twenty years. The client was able to get a large sum of money now to begin the next chapter of his life.

Read more of what our clients have to say.

Reaching a Settlement Can Be Beneficial in Several Ways

Quicker resolution of your long-term disability insurance claim means you will receive your benefits sooner. This can alleviate the stress of meeting your financial obligations.

Reaching a settlement also means you will spend less time fighting about your benefits and more time focused on your recovery and not living for your disability claim.

A settlement gives you some control over the outcome. It is always your decision on whether to accept a settlement or not. With the appeal process (following a denied or terminated claim under ERISA) and the court (if that is the last recourse available), the decision and outcome are uncertain.

A Settlement Means No More Surprise Interviews, Surveillance Or Medical Exams

Once a settlement has been made on a long-term disability insurance case, the agony of wondering when the insurance company will stop paying or when you can stop going to see insurance company-paid doctors for evaluations is over.

But There Are Also BIG Drawbacks To Keep In Mind:

  • If the offer is too low, it’s not worth accepting.
  • If you can’t trust yourself to be careful with the money and make it last, it’s not a good idea
  • If you have debt problems and creditors, a lump sum payment may be attached for liens.
  • Once you sign off on the agreement, you cannot make any further claims for disability from that company.

An Unusual Disability Settlement Case Study

We recently resolved a matter with a major disability insurance company, through its third-party vendor managing the claim, whereby our client will continue to get paid for his lifetime, at a reduced monthly benefit, to resolve the disputed claim and ensure the viability of his benefits going forward.

He took great comfort in knowing that he will now live free from the ongoing harassment from the insurer, in an effort to impact his treating relationship with his medical provider, and to make determinations as to whether he was undertaking the appropriate care and treatment under the policy to qualify for continued benefits.

In reaching this determination, the client was able to cease medical requirements that provided no benefits, were costly and ineffective, and which caused harm due to the necessity of travel. The client feels relieved to no longer be wondering on a month to month basis whether his claim was being challenged, or terminated. Our role in advocating on his behalf helped move the case from being on the verge of a claim termination challenge to one that is now without need for further involvement.

Read more of what our clients have to say.

Aggressive Reputation In Settlement Negotiations

At Frankel & Newfield, P.C., we are known for our aggressive representation of our clients. Our adversaries and clients are aware of this reputation, and it serves our clients well. Insurance companies know we will fight back for our clients. As a result, they sometimes prefer to settle out of court to resolve the case.

We know the process and have worked with the money people at many of the disability insurance companies. Knowledge of the process can be powerful during this important time.

In some instances, long-term disability benefits claims can be settled or resolved without appeals or trials. We are skilled lawyers and negotiators, and our experience and knowledge in the economics of disability insurance benefits provides us with the ability to settle cases in the best interest of our clients, even when we are presented with difficult or complicated situations.

We have success in getting substantial long-term disability benefits settlements on behalf of our clients. Please feel free to call 877-583-2524 or contact us today to request a free legal consultation. We are based in New York and represent clients nationwide.

Jason A. Newfield

Written By:

Jason A. Newfield

Disability Insurance Attorney