You were relieved to be granted long-term disability benefits after your initial claim or appeal, but now you are being offered a lump-sum settlement, and you are unsure about what to do. You have come to the right place! We encourage you to get all the information you can before making a decision. Our LTD team can help you weigh the pros and cons and make sure the settlement represents what your claim is worth.
What Is a Lump-Sum Settlement?
When your LTD claim or appeal was successful, you started receiving monthly benefits. Issuing these payments over a number of years is expensive for the insurance company. They are already at a loss by having to pay your claim in the first place, so they want to save as much money as they can. Offering you a one-time lump sum is one way they try to cut their losses. They are essentially buying out your policy. The settlement offer they make is going to be less than the total you would have received over the years you are disabled, and they understand that a large sum of money at one time is appealing to their policyholders. Before you are tempted by the carrot they dangle in front of you, you need to figure out if it is the best choice for you.
How Your Settlement Is Calculated
The LTD insurance company will look at a number of factors to determine the lump-sum value of your claim. They will consider the following:
- Your age and life expectancy
- The nature of your disability and the likelihood it will last
- The amount of your current monthly benefit
- The cash they have available for buyout
As you can see, half of the decision is fairly subjective. They will start with an offer that low-balls your life expectancy and length of disability so they save money. It’s important to understand that, even if you want to take a settlement offer, you don’t have to accept the first offer they make. The insurance company will do everything they can to get you to accept an undervalued claim. A long-term disability attorney can help negotiate a fair offer.
Advantages of a Lump-Sum Settlement
A lump-sum settlement is never going to match the total you would have collected over many years of benefits, but there are some clear advantages to settling your disability claim. Getting all of the money at once is helpful if you have a big expense, such as a home renovation to accommodate a wheelchair, a handicap-accessible vehicle, or another important one-time purchase. You will also eliminate the worry about your benefits being cut off at some point down the road, and you will not have to deal with the insurance company anymore. This can be a huge relief for some people.
Why You Might Not Want to Take a Settlement
Before making a decision, you have to be honest with yourself. How good are you at managing money? How likely are you to use the settlement funds as they are intended—to make up for lost income over a period of years? For some people, the monthly deposits help them manage their income when they would otherwise spend it all on something unnecessary but fun. Do you have needy family members who might take advantage of you? That’s another reason to consider refusing a settlement.
Depending on how you purchased the LTD policy, you might also owe income tax on a lump-sum settlement, which would significantly decrease the value. An attorney can help you figure out the tax situation before you make a decision.
Our LTD Settlement Team Can Help!
Deciding whether to accept a long-term disability settlement is not easy. The large sum of money will be tempting, but it could cost you in the long run. The good news is, you do not have to decide alone. The dedicated legal team at Gibbons Law Group, PLLC has extensive experience handling LTD settlements. Contact us today to schedule your free case evaluation.